Have you heard of shareholder activism?

  1. Financial value creation: An activist investor targets companies with higher levels of cash and liquid securities and low or no borrowing. They campaign for returning unused cash to shareholders explicitly (via a dividend) or implicitly (via a share repurchase)
  2. Strategic value creation: An activist investor targets companies with non-core businesses and which may be valued either higher or lower than the intrinsic value. They campaign to divest assets and unlock value
  3. Operational value creation: An activist investor targets companies that are inefficiently run, meaning those that are not up to date either technologically or operationally
  4. Regulation and governance: An activist investor targets companies with corporate governance issues or lapses. They campaign, for example, for changes in board structure, management compensation, and separation of roles of chairman and CEO
  1. Proposing resolutions: Proposing resolutions at board meetings to address and influence areas such as corporate policies and practices, executive compensation, operations and corporate behavior
  2. Proxy voting: Activist shareholders may try to persuade other investors to use their proxy votes to promote changes in management and board composition
  3. Hedge fund activism: May use borrowed money in an aggressive strategy to effect a notable change in corporate strategy or financial structure, or major board or management changes
  4. Mass media: May resort to negative publicity campaigns to draw public attention to shareholder concerns to put enough pressure on management to agree to shareholder demands
  5. Litigation: In the worst-case scenario, activist investors could initiate legal action against management on matters including but not restricted to social and environmental factors

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Acuity Knowledge Partners

Acuity Knowledge Partners

We write about financial industry trends, the impact of regulatory changes and opinions on industry inflection points. https://www.acuitykp.com/