INVESTING EXPLAINED: What you need to know about activist investors, who take stakes in all types of companies to drive reform
In this series, we break the jargon and explain a popular investing term or topic. Here, they are activist investors.
Someone who invests in gyms?
That would be correct. An activist investor buys stakes in all types of companies to bring about reforms, such as breaking up the company, increasing dividend payments, or ousting the CEO.
The overall goal may not be clear, but the goal is to make money, although that may not happen.
Most activist investors are hedge funds, but institutions can get involved.
Cashing In: Activist Investor Takes Stakes in All Types of Companies to Cause Reform
Why is it in the news now?
In the United States, there has been an upsurge in activist activity, partly in response to a change in rules by the Securities and Exchange Commission, the investment watchdog.
This week, Disney CEO Bob Chapek was ousted and replaced by former incumbent Bob Iger.
Activist investor Daniel Loeb, head of hedge fund Third Point, has been pushing for a major change at Disney.
Which companies are under pressure?
Big Tech is in the sights of activists. Alphabet, owner of Google, is attacked by TCI, the hedge fund led by British manager Chris Hohn. TCI, which has a $6bn (£4.9bn) stake in Alphabet, wants the tech titan to cut costs. Brad Gerstner, head of hedge fund Altimeter Capital, is also campaigning for lower spending – within the Facebook group and Instagram Meta.
Altimeter wants Meta to focus less on the metaverse. Meta shares have jumped 20% over the past month, while Alphabet is up 3%.
Something happening in the UK?
A good deal. Nelson Peltz, 80, of Trian Fund Management, is perhaps best known as Brooklyn Beckham’s stepfather.
But he is also making his presence felt at Unilever, the Marmite Group and Magnum, where he has a £1.4billion stake.
Peltz is a member of the board and has signaled that he is looking for candidates to take over as chief executive when Alan Jope steps down next year. His playbook is based on splitting or selling divisions.
He is the winner of battles at Cadbury Schweppes and Procter & Gamble.
Others in the spotlight?
The Anglo-Swedish fund Cevian Capital, which bought 6% of Aviva in the summer of 2021, is asking the insurer to increase returns to shareholders.
This month, the company, which has been slimmed down, promised “regular and sustainable” payments.
These dividends make Aviva an attractive buy, according to some analysts.
Who is the most famous activist?
Carl Icahn, 86, rose to prominence in the 1980s as a corporate raider through campaigns with airline TWA and food group RJR Nabisco.
The fall of the latter was chronicled in the book Barbarians At The Gate, which was made into a film. During this century, Icahn reinvented himself as an activist shareholder, promising that the stock prices of his target companies would soar on the “Icahn Elevator”.
Is following activists profitable?
Sometimes yes, sometimes no, which is irritating. Currently, Icahn is focused on Crown Holdings, a beverage can maker. Its shares have risen 18% since appearing on the scene. Shares of Unilever have risen slightly this year, but those of Aviva are down.