October 24, 2014 Leave a comment
When most people think of investors, they think of Wall Street and Warren Buffett. However, the most recent trend in the investment world has been the rise of activist investors. Activist investors are becoming more common and successful. According to Activist Insights, there were less than 30 activist investor campaigns in the year 2000. Compare that to present day, and the 237 campaigns launched in 2013, and you’ll see just how successful activist investors have been during the past few years.
One example of an extremely successful activist investor is Daniel Loeb of Third Point LLC. Third Point, Loeb’s hedge fund, pulled in $2.5 billion in fresh cash from investors in just two weeks this past August. This increases the firm’s total assets to $17.5 billion, up from $15 billion. Loeb’s investments include shares in Dow Chemical, T-Mobile, Twenty-First Century Fox, Disney, FedEx, Yahoo!, and several others.
The most well known example of activist investor influence to date is the $45.4 billion bid to purchase Allergan by activist investor Bill Ackman in partnership with Valeant Pharmaceuticals. Allergan, the company that gave the world Botox, is still considering the bid, but it is already being viewed as a watershed moment in the relationship between activist investors and big businesses.
“It’s not new for an investor to team up with an established company to make an offer, but I think this sets the precedent here for large companies to do it,” said Damien Park, managing partner at Hedge Fund Solutions. Ackman is another formidable activist investor, and his partnership with major companies like Valeant Pharmaceuticals will only strengthen his investment strategies.
While activist investors are undoubtedly becoming more successful and larger in number, there still remains the question of whether they are a good or bad influence on our economy. The debate rages on, though many have fallen in line to support the notion that activist investors and their actions keep companies on their toes, if nothing else.
“I think some aspects of activism have gone too far, and in some cases activism does breed corporate efficiency because corporations are made more vigilant than usual in anticipation of it,” said Evercore founder Roger Altman. “You can’t say activism is good or activism is bad.”
Learn more about activist investors by visiting Investopedia.