Carl Icahn is the most famous one. He buys big stakes (10%? 15%?) of companies that have performed poorly for a long time. He identifies 3-4 things that the company can do to immediately to goose its stock price (like...how about selling that fleet of jets you keep for your execs...or how about selling off the money-losing Somalia division...or how about just getting a new CEO who isn't, in fact, a drunk?) The activist buys shares. And remember: it's the common shares that elect the board, and since usually less than half of a company's total number of shares ever vote in elections, owning 15% is often enough to make huge changes in a company's management, especially when the stock has performed poorly for a long time.
So the big shareholder gets active. He rattles the cage of the company and hopes to generate value for his own shareholders. The system works for companies that have had bad results for a long time; not so much for companies that have done extremely well.
Like...try complaining that Jeff Bezos has done a bad job running Amazon and listen to the laughter you'll get from the major institutions that have owned the stock for the last decade or two.
Related or Semi-related Video
Finance: What is Activist Investing?11 Views
Finance allah shmoop what is activist investing Welshman gigi foot
massagers has been around forever great grandpappy elmo spanish for
the mo sold them to the u s army after
long marches through the r den in the first world
war Teo you know end all wars The soldiers then
bought them when they got home and consumers followed suit
with company was so successful that it didn't need to
be all that efficiently run It went public in nineteen
sixty five and was a good stock for a while
Then in the early nineteen nineties the company didn't adapt
to the new world of internet distribution and robot manufacturer
so the stock languished It remained the same price in
nineteen ninety five that it was some two plus decades
later Well during that same period the overall stock market
went up almost five hundred percent and shmoop gigi's primary
competitors P eta terrible went up eight hundred percent stealing
loads of market share from schmidt ge whose product was
now ah define a ble inferior Well since this company
was public and largely now owned by the public the
public had the right to have a say in how
the company was managed Endless angry letters were sent to
the ceo elmo the fourth jr a direct descendant of
happy elmo the founder Those letters were ignored more letters
followed to the board and they were ignored as well
Then finally a set of activist investors decided it was
time to step in Ironically on comfortably massage feet courtesy
of shmoop gigi well the activist investors simply coalesced all
of the common stock shares they could find you know
identifying who owned him and said hey can you vote
with us And when the next board election came where
three of the eleven director seats were to be voted
on while the activist investors elected their own slate or
group of directors who would begin to force the company
to behave more like a shareholder friendly profit seeking company
instead of ah make work project for the progeny of
pappy elmo to simply take a salary and make tens
of thousands of sore feet relatively happy In fact the
activism here was pretty common in situations like this fat
companies who didn't streamline and adapt but who still had
pretty good brand names were out there And while there's
a whole qadri of lawyers who do little other than
chase companies earning twenty cents a share when they should
be earning a dollar a share for share holders like
that's who they work for shareholders Activist investing has become
so common that it is almost an industry or investment
category or strategy unto itself now and that's A good
thing because some of those fat cos well you know 00:02:51.66 --> [endTime] they could stand to lose a pound or two
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