Is the market too efficient for Activist Investors
I’m sure this is all old news for you at the HFs and has been discussed many a time.
I’ve enjoyed a few good activist investor docs recently, Carl Icahn’s a notable mention.
Do we beleive this style of activist investing is immeasurably harder today; with increased market efficiency through more eyes than ever before & algorithms; expensive debt; and generally better governance. Do activist investors still have a chance to make big cash these days?
And on another note, what will the Carl Ichan’s look like in another 20 years. Do we see this style of investing fizzling out, and the mathematically gifted extracting most of the value from the markets?
To answer succinctly: No, the market is not too efficient for activists. Mostly because there is still persistent abhorrent governance, especially in smaller areas of the market. So long as companies are run by real human beings, other real human being shareholders are going to have disparate views on how the business should be run, and that will invite activists. I'm involved in several situations where corporate execs are happy to burn shareholder cash so that they can continue to earn a paycheck; activists are prevalent in these areas. In terms of the future of activism, it's no longer a "strategy", but rather a tactic. We likely won't see any Ichan, but activism will be opportunistic among most active investors with the requisite clout.
Starboard, Elliot and Trian create value and do well still. Elliot cubs also.
Third point and Pershing less so.
Jana is so bad
JANA sold half their firm for 8x revenue. I assure you Barry and Scott don’t give one fuck.
Read the book Dear Chairman to understand the history of activism, there’s lot of complacency in the small and mid cap space for activism to be an effective strategy.
Also in a weird way one can argue market efficiency can help activism, if an efficient market is valuing a company at a low multiple compared to comps because operating performance is subpar, an activist can come in and force mgmt to improve operating results, which would result in efficient markets valuing the company aligned with comps
The markets efficiently sniff out bad management teams and bad boards. But the markets can’t make changes, activists can and do.
There will always be some company with a dumbass executive to target
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