Activists Misunderstand How Targets Work

Activist investors often don’t do well because they tend to misunderstand how their targets work, says a study in the Yale Law Journal. It found that “activists have a higher risk of mistargeting – mistakenly shaking things up at firms that only appear to be under-performing.” Activists do not see the whole picture about their target companies as they are focused on the short term and thus make a lot of mistakes with negative consequences, says the study.