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Matt Levine

The SEC Wants to Stop Activism

Also nickel, rubles and pre-NFTs.

Programming note: Money Stuff will be off tomorrow, back on Monday.

The way activist investing works in the U.S. is generally that an activist investor quietly buys up a chunk of a company’s stock, announces that she owns the stock, and goes to the company’s managers asking them to change something about their strategy or operations. Sometimes the managers agree, there is a productive conversation, the activist helps the company improve, the stock goes up and eventually the activist sells at a profit. Sometimes the managers disagree, and the activist tries to pressure them into doing what she wants. She might wage a public campaign, writing open letters explaining her position. She might talk to other shareholders — big institutional holders who don’t wage activist campaigns themselves but who own a lot of stock — to persuade them that she is right. If lots of shareholders agree with her, but the managers still don’t, she might launch a proxy fight: She will nominate some people to the company’s board of directors and try to get them elected to replace some of the existing directors. If enough other shareholders vote with her, her candidates will win and join the board and presumably do the things she wants. Hopefully the things she wants are good and the stock will go up and she will sell at a profit.