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Mutual Funds Videos 165 videos

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Finance: What is Activist Investing? 11 Views


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What is Activist Investing? Activist investing is done with the goal of actually implementing change at a company by buying so many of its shares. By doing this, the investor can try to get a seat on the board or own such a big chunk of the company that they are able to influence decisions.

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Transcript

00:00

Finance allah shmoop what is activist investing Welshman gigi foot

00:08

massagers has been around forever great grandpappy elmo spanish for

00:14

the mo sold them to the u s army after

00:16

long marches through the r den in the first world

00:19

war Teo you know end all wars The soldiers then

00:23

bought them when they got home and consumers followed suit

00:26

with company was so successful that it didn't need to

00:30

be all that efficiently run It went public in nineteen

00:33

sixty five and was a good stock for a while

00:36

Then in the early nineteen nineties the company didn't adapt

00:40

to the new world of internet distribution and robot manufacturer

00:44

so the stock languished It remained the same price in

00:48

nineteen ninety five that it was some two plus decades

00:51

later Well during that same period the overall stock market

00:54

went up almost five hundred percent and shmoop gigi's primary

00:58

competitors P eta terrible went up eight hundred percent stealing

01:02

loads of market share from schmidt ge whose product was

01:06

now ah define a ble inferior Well since this company

01:10

was public and largely now owned by the public the

01:14

public had the right to have a say in how

01:16

the company was managed Endless angry letters were sent to

01:20

the ceo elmo the fourth jr a direct descendant of

01:24

happy elmo the founder Those letters were ignored more letters

01:29

followed to the board and they were ignored as well

01:32

Then finally a set of activist investors decided it was

01:36

time to step in Ironically on comfortably massage feet courtesy

01:41

of shmoop gigi well the activist investors simply coalesced all

01:44

of the common stock shares they could find you know

01:48

identifying who owned him and said hey can you vote

01:50

with us And when the next board election came where

01:53

three of the eleven director seats were to be voted

01:57

on while the activist investors elected their own slate or

02:00

group of directors who would begin to force the company

02:04

to behave more like a shareholder friendly profit seeking company

02:08

instead of ah make work project for the progeny of

02:11

pappy elmo to simply take a salary and make tens

02:14

of thousands of sore feet relatively happy In fact the

02:18

activism here was pretty common in situations like this fat

02:22

companies who didn't streamline and adapt but who still had

02:25

pretty good brand names were out there And while there's

02:29

a whole qadri of lawyers who do little other than

02:31

chase companies earning twenty cents a share when they should

02:35

be earning a dollar a share for share holders like

02:38

that's who they work for shareholders Activist investing has become

02:41

so common that it is almost an industry or investment

02:45

category or strategy unto itself now and that's A good

02:48

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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