Activist Investor

An individual or group that purchases large numbers of a public company’s shares and/or tries to obtain seats on the company’s board with the goal of effecting a major change in the company. A company can become a target for activist investors if it is mismanaged, has excessive costs, could be run more profitably as a private company or has another problem that the activist investor believes it can fix to make the company more valuable.

Private equity firms, hedge funds and wealthy individuals are types of entities that might decide to act as activist investors. One well-known activist investor is Carl Icahn. He has attempted to make major changes at Yahoo!, Blockbuster, Time Warner and RJR Nabisco, among other companies. Other big-name activist investors include Kirk Kerkorian, Bill Ackman, Eddie Lampert and Nelson Peltz.

One indication that a company may have become a target for activist investors is the filing of SEC Form 13D, which must be filed when an investor purchases 5% or more of a company’s shares.