An activist investor is a shareholder that uses a fair stake in a corporation to pressure on its management. They purchase a massive number of public companies shares and try to secure seats on the company’s board. They do so because then they can affect a significant change in the company. The aims of activist shareholders range from financial ( increase in the shareholder value through specific changes in corporate policy, economic structure, cost-cutting, etc.) to non-financial (adoption of environmentally friendly policies, disinvestment from particular countries, etc.)
How do Activist Hedge Funds Work?
Activist hedge funds (an alternative investment designed to safeguard investment portfolios from market uncertainty) push for necessary changes at companies. The changes may range from removing management and board directors to buy back stock and withdraw supplementary assets.
Activist Investor asking GameStop to go through Major Changes
An activist investor group is asking for two seats in the GameStop (NYSE: GME) boardroom. And also with some drastic changes to the video game retailer’s business.
Why does GameStop Stock Price Fall?
GameStop shares fell approximately 10% after two activist investors delivered a letter to the board, putting pressure for representation on the board, during Thursday’s session.
Hope for Dying Retailers
- First, TellGameStop followed many ideas; such as boardroom revamp, significant cost cuts, and an aggressive share buyback program; but there is still a lot of work to be done.
- Second, the investors holding 7.6 % of GameStop’s share, see a place for a focused brick-and-mortar retailer in the evolving video game market.
- Third, this is possible if and only if GameStop cut back its executive pay and optimize its retail asset before being too late.