Dan Loeb's Investor Letter: activist investors the good guys?

With the completion of its 20th year of investing with annualized returns of about 20.5%, Third Point LLC founder and CEO Dan Loeb, defended modern activist investing in his newly released investor letter:

Activists today are very different from corporate raiders of the ‘80’s (about whom these criticisms might have been leveled fairly). Our activist investments, which we consider to be those in which we seek to use our minority shareholding to obtain board seats, have been some of our most complex and have been held for well over the one year threshold identified as offensive by the critics.

...We believe that activism serves an important function not only for our investors, but also for capital markets and society in general. The success of America’s large and robust capital markets – the greatest in the world – rests on a framework based on principles of democracy like freedom of speech, transparency, and rule of law.

...The reason that companies (with the exception of a few in the tech space) are able to raise capital so smoothly is because investors understand that a governance structure known as a board is in place to hold management accountable, be responsible for management’s fair compensation, and oversee important capital and strategic decisions. The fact that shareholders have the right to vote for or sometimes remove directors is critical to the ecosystem of the capital markets.

Do his comments change the perception of the often criticized world of activist investing at all?

3 Comments
 

People who criticize practices like activism or distressed investing often don't listen to logic or reason.

"After you work on Wall Street it’s a choice, would you rather work at McDonalds or on the sell-side? I would choose McDonalds over the sell-side.” - David Tepper
 

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