Overview

Activist investing is a type of investment strategy in which an individual or institutional investor acquires a significant minority stake in a publicly traded company with the intent of influencing its management and operations. Often, activist investors seek to initiate changes they believe will increase shareholder value, such as restructuring corporate governance, altering capital allocation policies, changing company strategy, or promoting mergers and acquisitions.

History

The origins of activist investing can be traced to the 1980s in the United States, with figures such as Carl Icahn and T. Boone Pickens gaining notoriety for aggressive tactics. The practice has since evolved, and activist investors now operate globally across multiple industries and markets.

Methods

Activist investors may use various tactics to influence company policy, including:

• Shareholder Proposals: Submitting resolutions to be voted on at annual meetings.
• Engagement with Management: Direct negotiations or dialogue with the board and executives.
• Proxy Fights: Attempting to replace board members through shareholder votes.
• Public Campaigns: Engaging in public relations campaigns to win other shareholders’ support.

Legal and Regulatory Environment

Activist campaigns are typically subject to securities laws and regulations, which may require public disclosure of significant shareholdings. In Japan, for instance, investors acquiring more than 5% of a company's shares must file a large shareholding report with financial regulators.

Global Trends

While traditionally most prevalent in the United States, activist investing has increasingly become common in European and Asian markets. In Japan, evolving corporate governance standards have contributed to a rise in activist campaigns from both domestic and foreign investors.

Controversies and Criticisms

Activist investing is sometimes criticized for encouraging short-termism and for pressuring companies to prioritize share price gains over long-term strategy, employee interests, or other stakeholders. Proponents argue it promotes accountability and operational efficiency.

Notable Examples

Prominent activist investors include Elliott Management, Pershing Square Capital Management, and Oasis Management. Their campaigns have led to significant changes at major corporations worldwide.

Conclusion

Activist investing remains a dynamic and influential force in global financial markets, shaping the governance and strategic direction of numerous corporations.