Shareholder activism isn’t an official form of investing, but it’s part of the larger umbrella of “value investing.” In shareholder activism, an “activist investor” acquires major stakes in a company, and tries to shake up the management or business in some way that will increase the company’s worth—resulting in a profit for the investor.
Many investors don’t like to call themselves “activist” simply because becoming activist isn’t mutual exclusive of other investment styles. There are very few serial activist investors, but the ones that are have made a name for themselves.
According to a CFO.com article in 2007, less than 10% of of 8,800 hedge funds worldwide were activist hedge funds. But the investment style is certainly pick up popularity, so we rounded up some of the activist investors that have made the most noise in the past.
Firm: Icahn Partners
Net worth: $13 billion
Famous Deals: Earlier - American Can, Uniroyal, Texaco and RJR Nabisco. More recently, he took over drug maker ImClone Systems, which resulted in a sale to Eli Lilly, netting Icahn $418 million from an initial $196 million investment in 2006 and made big bucks off Motorola's sale to Google. He's also known for his failed attempts at breaking up Time Warner and Yahoo.
Fun Fact: The character of Gordan Gekko on Wall Street is based partially off of Icahn.
Firm: Chapman Capital
Net worth: n/a
Famous Deals: In 2007, Chapman tried to force Embarcadero Technologies to sell itself by threatening to publicize dirt he had on senior management and the board of directors, which he had private investigators dig up. Lately, Chapman has laid low and made relatively few headlines.
Fun Fact: It was Chapman's public letter-writing that inspired Dan Loeb to take up his own 'poison pen' and attach them to 13-D filings.
Firm: Third Point
Net worth: n/a, but Third Point has over $3 billion in AUM
Famous Deals: Making $20 million off Agribrands purchase by Cagrill after arguing that original tender offer by Ralcorp was too low; helped Washington-based Potlatch's stock value more than double by urging CEO Penn Siegel to step down. More recently, Loeb has been very involved in trying to shake up management in troubled online giant Yahoo.
Fun Fact: Loeb is well known for his 'poison pen,' writing letters which belittle and insult management at companies he is interested in.
Firm: Pershing Square
Net worth: $700 million est.
Famous Deals: A failed management shake-up at Target, currently successful changes in JC Penny, and current proxy fight with Canadian Pacific.
Fun Fact: Ackman tried to buy Stuyvesant Town in New York by picking up debt on the real estate project during its foreclosure proceedings, he ended up backing out and sold his debt, breaking somewhat even.
Firm: Harbinger Capital
Net worth: $2.2 billion
Famous deals: Falcone may be known nowadays for the Lightsquared fiasco and the riches he made off subprime mortgages, but the hedge funder acquired a 19% stake in the New York Times Company in 2008 and shook up the Board of Directors by adding two dissident board members.
Fun fact: He grew up poor in rural Minnesota and played professional hockey before taking up investing.
Firm: Fairholme Capital Management
Net worth: n/a, but runs a $17 billion mutual fund
Famous Deals: Berkowitz successfully shook up the board of directors of St. Joe, a Florida land developing company in Feb. 2011, which resulted in the departure of the company CEO. Berkowitz had owned a 29% stake in the company, which had been under attack from hedge funder David Einhorn who said the company was overvalued.
Fun Fact: Berkowitz's business partner Charlie Fernandez is his next door neighbour.
Firm: BP Capital Management
Net worth: $1.4 billion
Famous Deals: First came to prominence for offering to buy out Gulf Oil in the 80s, but his offer was rebuffed. Although Pickens was known as a corporate raider, very few of his deals came through because he is a greenmailer--meaning he would sell shares he had amassed back to company management for a higher price than what other shareholders can garner. Pickens focuses on natural energy companies.
Fun Fact: He once fancied a run for president in the 1980s.
Firm: Bulldog Investors
Net worth: n/a
Famous Deals: Goldstein is famous for becoming activist in close-ended funds rather than companies. For those deals, he buys shares of the fund when it trades at a discount, garners shareholder support, then converts the fund to an open-ended one or just liquidates the funds' assets.
Fun fact: Goldstein was an engineer before he started investing in his late 40's.
Firm: Relational Investors
Net worth: n/a, but their fund has around $6 billion AUM
Famous deals: Credited with shaking up management at Home Depot and ousting its CEO in 2007. They've also taken on activist stakes at Sprint Nextel.
Fun fact: Whitworth worked for Boone Pickens early in his career.