Stakeholder activism

30 June 2020 By Richard Beales Follow @richardbeales1

JPMorgan reckons market conditions have been ripe for pushy investors to set their sights on new target companies. The pandemic fallout could force lots of changes and deals. Yet traditional activist ideas and a near-exclusive focus on shareholder value may not cut it.

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Market disruption caused by Covid-19 created conditions that could bring a surge in shareholder activism, JPMorgan experts said in a new report.

Stock-market swings have allowed activist investors to buy stakes in companies cheaply, while the need for consolidation in hard-hit industries could encourage possible mergers, a favorite proposal of activists.

Among other headwinds, though, is the likelihood that activist investors do not want to be seen as profiteers from the pandemic, the report’s authors said.

Hedge fund activism brings short-term, shareholder-centric gains in companies’ market value and profitability but with a long-term cost to other stakeholders in the form of declining operating cash flow, investment spending and social performance, according to a recent study by Mark DesJardine of Pennsylvania State University and Rodolphe Durand of HEC Paris.

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