Active and Passive Activist Investors

March 13th, 2010
| More
Contributed by: Michael R. Levin, The Activist Investor
Activist investors seem to fall into two categories. Some take positions with the express purpose of agitating for change. They analyze companies, identify undervalued ones, and go right for the jugular. Their first move is to run a slate for the board of directors, or call publicly for the sale of the company. Not many of the commonly-recognized activists do this, but a few do. Let’s call these ones active activists.

Others wait a little. They look to interact with management discreetly, and try to accomplish their goals quietly. Let’s call these the passive activists.

Some thoughts on the difference:

- Passive activists include investors that take positions in order to effect change, and those that find themselves with an underperforming name that they want to turn around. Active activists buy a company so they can change it, profoundly and (maybe) quickly.

- Passive activists need more patience with the activism process, but probably spend less to accomplish their goals.

- Active activists start the war right away, which makes sense if there’s no hope of even talking to management. Not returning calls from investors is a tip-off.

- Passive activists frequently get more done at a company, since they can engage in tough debates about strategy, operations, and finances without embarrassing, at least initially, company management.

Passive activists always have the option to become an active activist at a given company. They need to show executives that they have the skills, resources, and most of all will to do that, which makes them more effective activists anyway.

Active activists can’t become passive, though. They burned that bridge early on.
Related Article Tags: Shareholder Activists, Corporate Raiders and Proxy Battles; Hedge Fund Resources and Featured Partner News


More Recent Headlines

Steel Partners settles lawsuit with Carl Icahn

Farallon Loses Some Managers, Gains Others

Lions Gate Fights Carl Icahn’s Efforts to Increase Stake

Hedge Fund Trends: Launches Outpace Liquidations, Incentive Fees Decline

Former Boston Provident Head Trader Pleads Guilty to Fraud

Top Goldman Hedge Fund Manager Starting Own Fund

“America’s Prophet” Sean David Morton charged with $6 million securities fraud

CRD Analytics and Trucost Expand Partnership

Centaurus Capital and Ares Capital face-off over Allied Capital Corp

Shareholder Activist Update: Centaurus Capital and Allied Capital Corp