Is the activist shareholder going to save the public company?  Msybe suggests the Economist,  Passive index funds sell at the first sign of trouble.

Acitivist hedge funds take small stakes  in firms and act like political campaigners.  They solicit other shareholder support for demands to be represented on company boards, cost-cutting spin-offs and returning cash to shareholders. Acitivists are often loathed by public -company bosses for their belligerence and opportunism,

Activists have funds which are worth $100 billion and in 2014 attracted a fifth of all flows into hedge funds,  In 2014, they launched 344 attacks against public companies.  One-half of all the companies of S&P’s list o fmost valuable firms had a big activist on its shareholder register.  At least one in seven of these firms has been attacked by an activist.

They seek to improve a firm’s board, and win the support of big money managers.  Activists don’t losd up on debt, just 5% or so.  There is no takeover premium and they extract fairly low fees.  Poor performance resulting from nderperforming companies, poor managers and lazy capital can be overcome by the activists.  When they lead a revolt, they may give a company a new lease on life.

by Claudio Munoz