investors come in all shapes and sizes from your mom and pop putting money away for their
retirement to multinational corporations buying up participants in their own supply chains
of all of these there are perhaps none that have a greater impact on what they are investing in than
the activist investor activist investors usually seek to buy up a controlling interest in a company
in order to enact changes which could increase the value of the shares they purchased to take control
of the company in the first place it's important to note that not all activist investing takes this
exact form sometimes activist investors will only buy up a minority stake in the company but still
use their relative voting power to appoint new board members and change the direction of the ship
slowly over time this strategy minimizes risk exposure to a single company but it's obviously
a lot harder to enact broad sweeping changes because they forego total power when they don't
control the majority of the shares some activist investors will actually do the exact opposite
and short a company stock while attempting to push through changes in the government rather
than the boardroom a great example of this was bill ackman's failed short position on herbalife
in which he attempted to lobby policymakers to class the company as an illegal pyramid scheme
this was still investing and taking an activist approach to increase the value of the position
but it's not what people normally think about when they think activist investor activist investors
are also not to be confused with active investors which is simply a title applied to anybody who
buys and sells stocks to hopefully outperform the market activist investors normally take the
form of a large private investment firm which will raise money from a wealthy owner or small group of
accredited investors the accredited investors won't invest in an individual company per se
they will rather be investing in the competence of the management team running the activist
investment fund there are some famous examples of these operations making sweeping changes
and radically improving a company's long-term prospect third point partners one of the largest
activist investment firms operating in the states today recently urged disney to suspend dividend
payments to shareholders and redirect those funds to the development of a streaming service what you
and i know today as disney plus the timing could not have been better because disney eventually
did roll out a streaming platform in november of 2019 just months before the start of the kovid 19
pandemic and subsequent lockdowns around the world some activist investors take an even more hands-on
approach carl icahn one of the wealthiest men in the world made his fortune through the process
known as corporate rating he would target companies with lots of assets but limited
growth opportunities and poor corporate governance he would buy up a controlling interest in those
companies and either redirect them towards a more profitable business model or would slowly
pull them apart laying off workers and selling the component parts of the company for more than the
shares were worth this type of activist investing is obviously very unpopular because it means that
the employees lose their jobs which can devastate thousands of families and even entire communities
that rely on the company's continued operations to support themselves recently there has been a
new breed of activist investors investors pushing for the mummification of companies these investors
have seen the market power of humor and are attempting to replicate the success of assets
like amc gamestop and dogecoin by making their own companies equally attractive to retail investors
with high risk appetite but will this be a viable long-term play common sense would dictate no but
these organizations are not dumb and they might actually have a pretty well thought out plan here
so it's time to learn how money works which was made possible this week by atlas vpn you might
remember a few videos ago i spoke about vpns trying to scare you into buying their service
well to much of my surprise atlas vpn actually reached out to me after that video and said that
they would like to sponsor a video to give an honest breakdown of what a vpn can actually do
so if you are afraid of your bank passwords getting stolen when you log into public wi-fi
at a cafe you need a new bank not a vpn what atlas vpn will do is allow you to make it look like you
are using the internet from a totally different location perhaps a different city or an entirely
different country this can let you access content on youtube netflix and other streaming services
that are restricted in your home country or if you are planning on finally traveling again it
also lets you shop around for the best hotel and airline deals i live in san francisco so airline
websites make the bold assumption that i am rich and would be willing to pay top dollar for my
seat on their plane when i change my location to a region with a lower cost of living i have
literally saved hundreds of dollars on the same trip on the same airline and if you are still
concerned about your online security then atlas vpn has a feature called data breach monitor
which automatically scans leaked databases from compromised websites and alerts you if any of your
personal information has been exposed atlas vpn is also incredibly affordable viewers of this channel
can enjoy these services all for just a dollar 39 per month when they use my link to sign up
they also offer a 30-day money-back guarantee so there is literally no risk in trying out a
service that has allowed me to give my audience an honest breakdown of the benefits they offer
now back to our activist investors pushing for the memification of public companies
what is the goal here well you might think it's just to be the beneficiary of the next
wall street bets pump and dump and sure that would be a huge bonus but it's not really the main goal
let's look at a recent white paper by the firm new orion which has recently taken an activist
investor role in the retailer macy's the firm has suggested amongst other things that the
retailer partner with certain electric vehicle manufacturers like tesla rivian and lucid the
plan is for the retailer to showcase these cars in their stores to drive attention to their stores
patrick boyle a fantastic youtuber and hedge fund manager covered this particular example in a video
over on his channel where he pointed out that this paper specifically omitted companies like gm
ford and nissan who also have their own electric vehicle offerings the logical conclusion was that
these companies just don't attract the kind of attention that the investors were looking for
tesla is worth more than almost every other traditional automaker combined and even the
perception of being aligned with them grants a huge multiplier to the company's valuation
you only need to look at the market value of hertz doubling after they announced that they would be
purchasing a hundred thousand teslas for their fleet back in october to see this effect in action
new orion's paper later went on to suggest that macy's should start accepting unspecified
cryptocurrencies online and in person as a payment alternative to the traditional credit cards in
cash this does not offer any functional benefit for regular business operations i'm sure only
a regular portion of macy's customers know what cryptocurrency is let alone want to use it to buy
silverware what it will do is make headlines that a major retailer is now accepting cryptocurrency
to facilitate purchases the kind of people that read these headlines will likely not be
macy's customers but rather they will be investors looking to hop on the next stock that has just the
right combination of nostalgia and meme worthiness this is really nothing new the tech bubble of the
late 1990s saw company valuations jump hundreds of percentage points simply for putting dot com
at the end of their name even if the name change reflected no actual change to the business
operations more recently the joke has been that if you want to triple your startup company's
market valuation you need to put a ping pong table and bean bags in your san francisco head office
ping pong tables and bean bags obviously make your business a tech company and tech companies
are just naturally worth five times more than a regular company with the same underlying
fundamentals six times more if you have kombucha on tap but it's no secret that tech startups are
just more attractive to investors which means that anyone that wants to boost the valuation of
a company in the short term should make it look like a tech company even if it really isn't one
how many times have you seen a business try to shoe horn in artificial intelligence or digital
platforms into their product offerings there are some companies that do genuinely utilize these
technologies but most only have them there to attract investors who are trying to tailor their
portfolio to ride the wave of the ai revolution or whatever the other nonsense flavor of the month is
well what is getting people excited these days is the potential that their company could be picked
up as the next meme stock the tech company multiplier is so 2019. if you really want an
unrealistically high valuation these days you need to be a meme company however i said at the
beginning of this video that this was not about trying to be the next darling of wall street bets
and that's true winning the meme lottery is great and any activist investor would be more than happy
to take that win but meaning up a company offers these activists a more consistent benefit we
have already seen how it gives them free publicity specifically targeted at the retail investors they
want to attract but it also warns off potential short sellers most activist investors tend to take
control of sickly companies because those offer the highest potential for growth if they are able
to turn the company around sickly companies are the logical target of short sellers who want to
take a bet on the slow but inevitable demise of a company that has no obvious reason for existing in
the modern world brick and mortar game shops at the age of steam libraries anyone but the bears
have learnt their lesson even if it makes sense to short a company based on its fundamentals it's
probably best to steer clear of any business that is making headlines for reasons that excite this
new age of investors now you might be wondering how sustainable this new way of doing business is
and the only answer i can give is i don't know activist investors tend to have a short-term
interest in a company they want to get in fix things up and get out with a nice healthy profit
before doing the same thing all over again fixing a company's management in operations is hard slow
and risky so if an investment firm can secure the same profit by just making an announcement
about electric cars they would be silly not to ultimately this is all made possible by
investors who want to invest into a company because it's funny because they think other
investors will invest more into the company because they think it's funnier i don't think
that this has the potential to break the stock market or anything but i think that the lesson
here is not to get too excited about companies making seemingly impressive announcements about
frontier technologies or creative ways of doing business i would also warn against building a
portfolio from something that you think is going to be the future ai space travel and electric cars
are all very exciting but their true future potential has already been priced into their
stocks by people who are much smarter than you or i wendy's can make sassy comments on twitter
macy's can park teslas in their stores and 20 somethings can like gamestop stock as long as they
want but if the core business is no good there is only so long that a joke can delay the inevitable
if this warning about meme investing didn't make you angry enough make sure to check out
my video warning about ethical investing thanks again to atlas vpn for offering a fantastic
deal to my viewers and making it possible for everybody to keep on learning how money works
you