An activist investor is an individual or group that purchases a huge stake in a public company to influence how the company is run, for example, by getting seats on its board of directors. Companies that are mismanaged, have unreasonable costs, could be run all the more productively whenever taken private, or have different issues the activist investor accepts they can fix are in many cases targets for activist investors.
Breaking Down Activist Investor
Private equity firms, hedge funds and rich individuals are the types of investors that could choose to act as shareholder activists. One indication a company has become a target for activist investors is the filing of a Schedule 13D with the Securities and Exchange Commission, which is required when an investor gains 5% or all the more a company's voting class shares.
Notable investors like Carl Icahn and Nelson Peltz use holding companies or hedge funds as vehicles for shareholder activism.
Carl Icahn established Icahn and Co in 1968 as a securities firm centered around arbitrage and options trading. Beginning in 1978, he started taking sizable and now and then controlling positions in companies. His targets have included RJR Nabisco, Texaco, Western Union, Viacom, Revlon, Time Warner, Yahoo!, Motorola, Apple and eBay, just to give some examples. In 2015, he pushed Apple CEO Tim Cook to utilize the company's cash heap to increase the size of its share buyback program.
In 1987, Icahn framed Icahn Enterprises (IEP), a diversified holding company that endeavors to open shareholder value by impacting management or taking a controlling interest. As of December 2019, Icahn Enterprises held huge positions in Herbalife (HLF), Cloudera (CLDR), and Hertz Global Holdings, among different companies.
Bill Ackman is the organizer and chief executive of Pershing Square Capital Management. In the past, Pershing has taken positions in Target Corporation and Wendy's International. Ackman's all the more notable moves remember a deplorable short position for Herbalife, losing to Carl Icahn, who took the contrary side of the trade. The two have a history of enmity. In 2003, Ackman sold Icahn his stake in Hallwood Realty, and contended he was owed extra totals when Icahn later merged Hallwood with another real estate company.
Pershing Square Capital Management is the investment manager for Pershing Square Holdings, which trades on the London Stock Exchange. In the primary half of 2020, Pershing's activities remembered restoring a core position for Starbucks (SBUX), existing a position in Berkshire Hathaway (BRK.B), and raising $4 billion to lay out a special purpose acquisition company (SPAC).
David Einhorn is the pioneer and leader of Greenlight Capital, a hedge fund he's managed for a very long time. Two of Einhorn's all the more notable plays incorporate shorting Lehman Brothers and Allied Capital Corporation. In May 2016, Einhorn announced that Greenlight had taken a $64 million stake in Yelp (YELP).
Dan Loeb is the organizer behind Third Point LLC, which is the investment manager for Third Point Offshore Master Fund, a London-recorded closed-end fund with $8.6 billion in assets. In 2012, Loeb took a position in Yahoo! furthermore, at last acquired a seat on its board of directors. In 2013, Loeb announced that his company was the biggest shareholder in Sotheby's. Third Point likewise held sizable positions in Baxter International and Ligand Pharmaceuticals.