Shmegeggie Foot Massagers has been around forever. Great grandpappy Elmo (Spanish for “The Mo”) sold them to the US army after long marches through the Ardennes in the first war to end all wars. The soldiers then bought them when they got home, and consumers followed suit. The company was so successful that it didn't need to be all that efficiently run.
It went public in 1965, and was a good stock for a while. Then, in the early 1990s, the company didn’t adopt to the new world of internet distribution and robot manufacture, so the stock languished. It remained the same price in 1995 that it was some two-plus decades later. During that same period, the overall stock market went up almost 500 percent, and Shmegeggie’s primary competitor, Pied a Terrible, went up 800 percent, stealing loads of market share from Shmeg.
Since this company was public and largely now owned by the public, the public had the right to have a say in how the company was managed. Endless angry letters were sent to the CEO, Elmo IV, Jr., direct descendent of Pappy Elmo the founder. Those letters were ignored. More letters followed to the board. Ignored. Then finally, a set of activist investors decided that it was time to step in...ironically, on comfortably massaged feet, courtesy of Shmegeggie.
The activist investors simply coalesced all of the common stock shares that they could find, and when the next board election came, where 3 of 11 director seats were to be voted on, the activist investors elected their own slate, or group of directors, who would begin to force the company to behave more like a shareholder-friendly, profit-seeking one, instead of a make-work project for the progeny of Pappy Elmo to simply take a salary and make tens of thousands of sore feet relatively happy.
In fact, the activism here was pretty common in situations like this...fat companies who didn’t streamline and adapt. And there is a whole cadre of lawyers who do little other than chase companies earning 20 cents a share when they should be earning a dollar. Activist investing has become so common that it is almost an industry or investment strategy unto itself now. And that’s a good thing, because some of those fat companies could stand to lose a pound or two.
Related or Semi-related Video
Finance: What is shark repellent?5 Views
what is shark repellant? So yeah for sharknado 11 the [empty movie theatre showing Sharknado]
schmoopy we just gave away the penultimate scene yeah sorry about that [shark getting sprayed with shark repellent]
well in the financial world however shark repellent is a fancy $5 word for
companies trying to fend off corporate raiding sharks like this guy trying to
take them over well companies deploy all kinds of tricks to dilute their shares [businessman attacked by sharks]
change their business dynamics create friction at the board level and
generally make themselves unappetizing to the Sharks hoping to eat them 4x and [businessman spraying shark repellent over their suit]
sell them for 2x4 years later well you'll hear of specific shark repellents [shareholder rights plan]
like poison pills and partner killer bees ie law firms that specialize in
hostile takeover defenses notion of a company currently trading at 40 bucks
getting a hostile takeover bid for $52 a share and somehow that being perceived
as just awful and terrible and bad is strange to many in the Wall Street [office workers complaining]
investing public if someone is really willing and able to pay a big premium to
buy a given company then why shouldn't it be sold to that new owner well in a
lot of cases the new owner will replace a whole lot of laborers with robots save [McDonald's drive-thru worker replaced with a robot]
a whole lot of money for shareholders and make the company more valuable to
shareholders so that's good for shareholders but not good for the slew
of laborers who are all now out of work and what do they do well the country's [ex-McDoland's worker crying]
taxpayers and typically pay for them in unemployment forms one way or another so [money going towards food stamps, unemployment checks and heathcare]
it's all an ugly political mess but the bottom line companies generally exist
for the financial benefit of the people who own them ie their shareholders and
if the stock market isn't giving the company a reflectively high value then
why shouldn't the company sell to someone who will and why is it the
company's owners job to employ laborers who could be replaced by robots cheaper [robot serving McDonald's drive-thru]
better faster hmm the point is that being that sharks well they aren't
always evil [shark boops guy off screen]
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