Activist Investors: a Good or a Bad Thing?
Have you ever heard of a mysterious activist investor? No? Well, you’re lucky you ended up here. This article will walk you through a brief but detailed intel on the basic facts about the activist investor. With that said, let’s get started!
Who Is the Activist Investor?
Now, you’re probably wondering: what does the activist investor actually do? Fair enough. Here’s the simplest explanation with no metaphors or hyperbole. Everyone knows that the main task of a usual investor is to choose a suitable investment tool that will at least ensure the preservation of funds. Or at best increase them. When you invest in the stock, you can no longer influence the fate of the invested funds (leaving aside the sale of shares).
Nevertheless, there is a special type of investor whose position contrasts markedly with the one described above. This is an activist investor, who can be either an individual or a large investment fund. The task of the activist is to solve the current problems faced by a company, and at the same time to provoke the movement of quotations in order to make a profit.
As a rule of thumb, the task of an ordinary portfolio investor is to buy low sell high. But he does not control the price, he only follows the market movement. The peculiarity of the activist investor is the provocation of the market movement. Although the goal is exactly the same. If this explanation is something you want, we invite you to come along with us just a little further.
World of Traditional Finance
Activist shareholders are looking for opportunities to find and create market value in companies they perceive as poorly managed. Or the ones where there is room for growth. When they see such an opportunity, the first step is to buy a significant part of a business and take advantage of their right to vote.
One of the most well-known activist investors is Carl C. Icahn. He is also called a corporate raider. You can guess what he’s famous for. He looks for underperforming companies, buys up large amounts of shares, provokes change in management, and then sells more expensive securities. This strategy allowed Icahn to make a fortune. Forbes estimates his net worth at $16.7 billion. Not bad, huh?
He tried his hand at General Motors, Motorola, Netflix at different times. Apple was among the businessman’s investments as well. Icahn bought the corporation’s securities worth 4.7 million. Afterward, he finalized the buy-back of about $150 billion. Aikan has a duty to maximize shareholder value. He increased the company’s stock by 3.8% with just two Twitter posts in 2013. How did he do it? He texted that he had a big block of Apple stock. Afterward, he said that he talked to Tim Cook, Apple CEO, about a major stock repurchase. This was taken minutes after the first statement.
What about the World of Crypto?
Will a high-yielding alternative asset class benefit from all that an activist investor has to offer? What are the advantages of having an activist investor in the land of crypto?
- For starters, such an investor can leave everyone better off. He can bring fresh ideas about how management can use the company’s assets or enhance its work;
- Demand for crypto can grow. If you want the truth, activist investors can make the asset’s price waft to the upside!
- They are powerful enough to bring a radical change. And only time will tell whether the changes will lead to good or bad.
- They get attention. Truth be told, an activist investor gets more attention than others. He also received all of the media attention.
- Suffice it to say, the company executives can’t ignore such an activist. He has leadership influence. In addition, he is more results-oriented. He will do his best to enhance the value of the coin.
But the activist investor is not without problems, either. Here is something you should know beforehand too. There are potential disadvantages, such as:
- The provocateurs of the market movement are thinking first and foremost of themselves. Sorry to destroy your worldview, but they act in pursuit of their own interests. These guys work out hot to game the system to make sure that it benefits them.
- Things could take a pretty bad turn. People tend to believe there is a “secret formula” to crypto, but there isn’t.
- The activist investor isn’t always right, but he’s always the investor. We’re all only human, you know. Human beings are fallible.
The grand takeaway here? Activist investors are large investors who use their investment opportunities to influence public companies. While their goals may differ widely, the strategies used by activist investors are generally the same.
Now you know that they present both interesting and controversial elements to the crypto space. So one way or another, they will change the crypto landscape in the near future. Let’s wait for the results.