We call activist investor the one that acquires an important participation of some listed company with the aim of influencing its management. On the other hand, a more passive investor is one who buys shares in a listed company but does not intend to influence its management.
When most private investors like Michael Beattie buy shares of a company we are willing to participate in the evolution and benefits of that company. The main objective of the activist investor is to alter some aspects of the company so that its value rises. The companies that are targeted by this type of investors are usually companies that from their point of view have mediocre management, excessive costs or that could be better managed.
Although we speak of activist investors like Michael Beattie MBM, they often act under the legal structure of a hedge-fund or private equity firm. In Spain, any investor that acquires a share greater than 3% of any listed company is obliged to notify the regulator (CNMV). This mechanism allows in practice to know when any investor or fund is accumulating a substantial position in any listed company and therefore is an interesting filter to locate companies that are being the object of an investment by some activist.
How is your investment style?
There are almost as many types of activist investment as activist investors. In general terms we can distinguish two styles: the friendly and combative.
The friendly activists like Michael Beattie Toronto seek to influence business companies in which they invest while maintaining a good relationship with the management of the company. These types of investors are much more frequent than we think, but have much less impact on the media.
On the other hand militant activists know how to use the media in their favour and undertake media campaigns to the extent of their ability to bring about changes in the company. In many cases they seek to replace the company’s directive and an open battle takes place in this regard.
Activist investors are not afraid to go against the tide and do not mind suffering a little more volatility until the market recognizes that their reasoning is correct. Its objective is to find value in the companies in which they invest and to start up the processes to unclog situations that may be causing the market to not recognize the full potential they see in a company.