Small Changes, Big Difference


January 22, 2020

My Dear Reader,

Yesterday we talked about activism in hedge funds and Martin Luther King. King did not yell accuse or even blame one group for the suffering of another. Instead he simply asked the United States to live up to what it aspired to be. and that is more powerful than any modern concept we have attempted to push since Kings Day. We also discussed yesterday the modern activist is more interested in tearing up the old than creating the new. Surprisingly though, King’s approach seems to have grabbed the attention of some sectors of the financial industry. Not that activist funds are simply being used more so by hedge funds than other funds, but companies that feel targeted by these funds may end up changing their practices, with little consequence for the shareholders. In the same article we referenced yesterday, the Oxford review writes:

“EMC started paying a dividend in part to distract activist attention from its large cash balance. Yahoo! lined up advisers to explore strategic alterna-tives before activists agitate for a sale. IBM hired two investment banks to “formulate a defense plan” against potential activists. Novartis explored selling three peripheral businesses “to reduce the likelihood of an activist intervention”. As a Fortune 500 director states, “Activism is part of corporate life today. It should be expected and anticipated by every company”.

So quietly, the financial industry is making subtle changes in large companies much quicker than any government or lobbyist could ever do and they’re doing so without actually harming commerce itself. You and I as a consumer are therefore not hurt by their activity either. While this pales in comparison to Dr.King’s actions, it’s nonetheless a reminder that activism does not have to mean political bickering or muckraking. 

To your creation and potential,

Kevin Prendiville