Activist investors are people or entities that aim to put pressure on a company to make changes.
These changes can be related to management policies, company structure, and other areas. For instance, some investors may choose to exert pressure on companies to adopt greener technology.
Many activist investors are also very involved in the financial activity of companies they hold shares in. Such entities may push for the promotion of cost-cutting measures or financial restructuring. They can also prevent takeovers and propose changes in the company’s vision and strategy.
Also, and especially in cases of in which companies are undervalued, activist investors can step in to purchase sizable percentages of stock and the proceed to initiate changes directed at bringing the stock prices up.
Activist investors can be individual investors or groups who have come together to forward a common interest or stand.
Since one way of exerting maximum pressure on a company is by being a major stockholder, many activist investors try to acquire a substantial percentage of shares in order to affect desired changes. However, there are also other ways of increasing pressure on companies. Some investors may turn to the use of publicity, negotiating, and even litigation.
Although the presence of activist investors may initially be perceived as a threat by companies, they can actually be very helpful in the sense that they are able to affect important changes. As shareholders, they look out for their own interests as well. They can increase the company’s value by purchasing a substantial percentage of stock, thus prompting other entities to catch on.
