Staked

PayPal and Pinterest shares soar after activist investor Elliott snaps up their slumping stocks

Thursday, August 4, 2022 by Robinhood Snacks |

A modern Midas… In Greek mythology, everything King Midas touched turned to gold. Activist hedge fund Elliott Management seems to think it has the Midas touch too. Shares of PayPal and Pinterest have spiked 14%+ this week after Elliott disclosed big stakes in each company (it’s now their top shareholder).

  • Staying active: Elliott is one of the world’s oldest hedge funds, founded in 1977 by Paul Singer. Since then, it’s bought 40 companies (like: Barnes & Noble, LogMeIn), built stakes in Twitter, AT&T, and Samsung, and is managing $56B in assets.
  • High stakes: Elliott uses its stake in companies to force them to change (think: cost cutting, replacing execs). Right now it’s also invested in Marathon Petroleum, Tesla, Wayfair, and Suncor Energy.

Activism’s so hot right now… Shareholder activism boomed last year, thanks partly to growing awareness of environmental, social, and governance issues. Investment companies like Engine No. 1 and Icahn Enterprises have lobbied (successfully) to install climate-focused board members at Exxon and (unsuccessfully) to force McDonald’s to change how it treats its pigs.

  • But at the end of the trading day, a primary goal of shareholder activists is plain ol’ profits. Example: Elliott bought Athenahealth for $5.7B in 2018 and sold it for $17B earlier this year, pocketing $5B+.
THE TAKEAWAY

Activists love bargains… and in today’s market many companies are priced lower. The S&P 500 is down 13% this year, but some shares are down way more: before the Elliott news, Pinterest and PayPal had lost about 40% and 50% this year. For activists like Elliott, slumped shares are an opportunity to launch turnaround efforts at a lower price. Shareholder activism is expected to rise this year as investors keep bargain hunting.