Activist Investors Spark Change at FIGS, RealReal, and More

Activist investors have been making waves in the stock market, targeting companies like FIGS and RealReal with demands that have significantly impacted their stock performance. In the case of RealReal, activist investor Legion Partners pushed for improvements in financial performance, cost reduction, and board enhancement. These demands led to a remarkable 100% increase in RealReal's stock price within a year of the activist campaign (Source: Barron's, "Unity Software, RealReal, and More Stocks See Action From Activist Investors").

Similarly, activist investor Marcato Capital Management targeted FIGS, advocating for new board members and operational changes. These demands resulted in a 50% increase in FIGS' stock price within a year of the activist campaign (Source: Barron's, "Unity Software, RealReal, and More Stocks See Action From Activist Investors").

These examples illustrate the significant impact activist investors can have on targeted companies' stock performance. By pushing for changes in management, strategy, and operations, activist investors can help unlock shareholder value and drive stock price appreciation.



Targeted companies have responded to activist pressure in various ways, with some strategies proving more effective than others in mitigating the impact on long-term shareholder value. Board representation and changes in senior management, capital allocation and operational changes, preemptive measures, settlements and public announcements, and engaging with activists are some of the strategies companies have employed to navigate activist campaigns.

Analysts and long-term institutional investors play a crucial role in evaluating the validity of activist demands and the potential long-term impact on targeted companies. Analysts' recommendations become more favorable after activist interventions, indicating that they see value in the activists' demands. Long-term, "dedicated" institutional investors increase their ownership in targeted companies, suggesting that these investors believe the activists' demands will lead to long-term value creation. Post-intervention improvements in operating performance (ROA) and firm valuation (Tobin's Q) further justify the positive response by market participants.

In conclusion, activist investors have a significant impact on targeted companies' stock performance, with their demands often leading to improved financial performance and increased shareholder value. Companies must be prepared to respond effectively to activist pressure, and analysts and long-term institutional investors play a vital role in evaluating the validity of activist demands and the potential long-term impact on targeted companies. By understanding and embracing these dynamics, investors can make informed decisions and capitalize on the opportunities presented by activist campaigns.