When there’s blood in the water, sharks start to circle. And when companies’ stock charts flash bright red, as the vast majority have done in reaction to the coronavirus pandemic, activist investors are more likely to bite.
Activists operate by amassing big stakes in companies and using the resulting leverage to pressure management to change strategy, often in ways designed to deliver quick returns to shareholders. Lower share prices, of course, make the first part of the strategy easier to execute. In 2007 and 2008, years when stocks plunged as a result of the financial crisis and Great Recession, the number of activist campaigns ticked up sharply.