For example, thankfully for shareholders of Ameritrade (NASDAQ: AMTD), SAC Capital's and Jana Partners' call for the company to acquire E*Trade (NASDAQ: ETFC) went unheeded.
This raises an interesting question: what exactly are activist investors good for? Given that most are hedge funds or other financial types rather than operational managers, I would argue that the value-creating abilities of hedge funds are limited to basically a few well-tuned strategies that have demonstrated their ability to create alpha over the years:
- Forcing out executives or directors who have performed poorly.
- Pushing an undervalued company to buyback its stock to return cash to shareholders.
- Pushing an undervalued company to hire an investment bank to explore strategic alternatives.
But, to paraphrase the DealBook headline, beware of hedge funds bearing operational advice.
Reader Comments (Page 1 of 1)
11-29-2007 @ 12:55PM
Anonymous said...
Wouldn't it be ironic if a certain group of people end up hammering this stock into rear oblivion, pick up a block for pennies on the dollar then ultimately get a merger together despite former resistance?