What are activist investors and how do they affect stock prices?

Activist investors are individuals or firms that buy a significant stake in a public company to influence management decisions and drive changes. They typically target companies they believe are undervalued or underperforming. When activists get involved, they often push for strategic changes like restructuring, spin-offs, management changes, or even a sale of the company. This can positively affect stock prices in the short-term as the market anticipates value-creating changes, and potentially in the long-term if their proposed strategies succeed in improving company performance.

Why did Starboard Value target Tripadvisor specifically?

Starboard Value likely targeted Tripadvisor because they identified a disconnect between the company's valuable assets (well-known brand, large user base, substantial traffic) and its stock performance. Tripadvisor has faced challenges in monetizing its user base effectively and adapting to changing travel booking patterns. Starboard, with their history of pushing for operational improvements and strategic changes, probably sees opportunities to unlock shareholder value through measures like cost-cutting, restructuring, refocusing business priorities, or even exploring a potential sale of the company or some of its assets.

What is an "OTA" in the travel industry?

OTA stands for "Online Travel Agency." These are companies that specialize in selling travel products like flight tickets, hotel bookings, car rentals, vacation packages, and experiences through their websites or apps. Examples include Expedia, Booking.com, and Trip.com. OTAs serve as intermediaries between travelers and travel service providers, offering consumers the convenience of comparing prices and options from multiple providers in one place. They typically earn revenue through commissions from bookings or through advertising models.

How does activist investing differ from regular stock investing?

Regular stock investing typically involves buying shares based on a company's financial performance, growth potential, or valuation, with investors having little direct influence on company decisions. Activist investing, on the other hand, involves acquiring a significant stake (often 5% or more) specifically to push for changes in how the company operates. Activists engage directly with management and boards, propose new strategies, nominate board members, and sometimes launch public campaigns to gain shareholder support. While regular investors benefit passively from company growth, activists actively work to create value by changing company direction, structure, or leadership.

What does "unlocking shareholder value" actually mean?

"Unlocking shareholder value" refers to actions that help a company's stock price better reflect its true worth, which activists believe isn't fully recognized by the market. This might involve selling underperforming divisions, spinning off valuable subsidiaries into separate companies, using excess cash for share buybacks or dividends, reducing costs, improving operational efficiency, or even selling the entire company at a premium. The core idea is that the sum of a company's parts may be worth more than its current market value, and strategic changes can help reveal this hidden value to shareholders through a higher stock price.

15 handpicked stocks

Activist Investor Impact: Travel Tech

Discover travel technology companies that could see value unlocked through activist investor interest. This carefully selected group of stocks follows Starboard Value's significant stake in Tripadvisor, highlighting companies with strong assets but underperforming prices that could attract similar attention.

Han Tan | Market Analyst

Updated 2 days ago | Published at juillet 3