Weekly Digest #60!!
Updated: Oct 13, 2021
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The Great Wall Street Reboot- The Rise of “Investors for good”
By Agastya Rao
Disclaimer- This article does not in any way offer any financial advice and the views expressed by the author are personal.
Cushy offices, suits and the single goal of making money. That is what people think Wall Street is. This however, is changing because of a certain type of investor called the Activist Investor.
Who is an Investor?
Very simply put, an investor is a person or a group that puts a certain amount of money into a company or a fund for a certain percentage of returns/profit from their investment.
Who is an activist investor?
An activist investor works a little differently. An activist investor may be individual or with a group or fund, but will invest in a certain company for a small or fairly significant share of the stock with the intention of affecting change in the company. Effectively, they use their newfound significance and power in the company to “force” them to bring a change in the way said company works or in their policy/ environmental or ethical policies etc, sometimes by bypassing normal advisory processes.
How they work
Step 1- Find the company with a problem
The first thing they will do is identify a company which they believe is in need of change because their current policies or technology is in danger of harming the planet or other people.
Step 2- Start buying shares
The next step is pretty obvious and that is to start buying shares of stock in the company. They get enough shares to know that they can wield enough power in the company to catch the eye of the board.
Step 3- Get seat(s) on the Board of Directors
Once they have the required shares to have enough power they can try and nominate their own members to the board. If they succeed in doing so, they will have more power when it comes to decision making and voting on important issues in the company.
Step 4- Use media and their board seats to pressure the company to change
Let us consider the example of climate change or labour rights. Say a big company is accused of not being climate or worker-friendly, or activist investors are trying to bring about a change in the company, and the media catches wind of it, it is likely that the news will spread like wildfire! Activist investors try to use the public eye and the media to their advantage to further strengthen their case and change the public’s view of the company. This can cause the stock to drop or put increased scrutiny on the company’s actions, with the result of strengthening the activist investors’ plan.
Step 5- If it goes well, they will change their ways
The last step is like the last stretch of a race. A runner always puts in all their energy at this stage. This is the time where the activist investors use their seats on the board and try to convince other board members to help pass a resolution for whatever change has to be brought into the company. If successful, they would have brought about whatever change they want to.
However they may not always be successful in their agenda, BUT at The Paperless Press we try our best to stay positive and if they fail the first time, they keep trying until they succeed :)
Why are they important?
Now you must be wondering why exactly activist investors are important, because any large protest can put pressure on the company too? Well, not exactly. You see, while protests and public uproar can pressure a company to a certain extent, they can’t really change the policies of the company in any way. Sometimes change can only be brought about from the inside, and activist investors have a certain amount of power as insiders in a company. This enables them to actually bring about changes in the company from the inside.
Considering the example of Climate Change once again, when it comes to big companies whether they are Oil Companies, car manufacturers or tech companies, each one of them has a fairly big carbon footprint, and who better to bring changes in a company than the investors themselves?
What this will do is it keep companies in check, in a manner speaking. Something akin to a constant reminder that their investors will know if they push limits.
One example is that of Engine Number 1, an activist investment group that caused the mammoth oil company Exxon Mobil to become more climate conscious and think of better climate goals and ideas for the future despite heavy resistance from Exxon, by getting 2 seats on the Board of Exxon
Is this taking matters into their own hands? Is this even legal?
The SEC regulates Wall Street; and the question one may ask is - do its Regulations allow activist investors’ actions or does this fall within the realm of market manipulation? For starters it is very easy for any famous person or even an activist investor to say something against a company which ultimately makes the stock drop.
For example (This information is just an observation) After Elon Musk called Dogecoin a “hustle” during his appearance on the Saturday Night Live show (not pointing fingers here), Dogecoin dropped in price, but when he tweeted about it later, the price of Dogecoin rose again. Countless people chose to short stocks (including activist investors at times) because shorting* stock is legal in America.
In the end, some may argue that the main reason activist investors are doing what they are doing is for a cause or a reason. Technically by just buying shares and getting a seat on the Board of a company they aren’t really doing anything illegal, just unconventional.
(*Shorting a stock- It is essentially betting that the price of the stock will fall, borrowing it and selling it and then buying it back at lower cost once the price has fallen, therefore making a profit.)
They (investors) have the power to bring a company up and take it down. Whether it was GameStop (For more, read Abhimanyu’s article on The GameStop SAGA in Weekly Digest #29) or AMC, we know that the stock market can go up and it can go down any day, but it's the companies inside the market that actually matter. Maybe activist investors have been ushered in as a wake up call to Wall Street that BIG BROTHER IS ALWAYS WATCHING :)
By: Mihir Rao
The beauty of more and more languages becoming popular all over the world is that a wave of new words is added to the Oxford English Dictionary! Following the trend, a slew of new Korean words have been added to the dictionary on account of their frequent usage in these times. Words like Mukbang, K-Drama, and even Squid Game, a Korean Netflix show, have been added to the Oxford English Dictionary.
The EU is banning the use of Titanium dioxide in 2022. This chemical is a food additive, used as a colourant in products like chewing gum and pastries. However, since there is a potential health risk that comes with this chemical being added in food products, the chemical is soon to be banned from usage in all food products.
Recently, Anshu Malik became the first Indian woman to advance to the finals of the World Wrestling Championships, also winning a silver medal along the way!
Sikkim is making big steps towards a cleaner, healthier environment by banning packaged mineral water bottles from the 1st of January 2022. This is instrumental in avoiding plastic pollution and is a step towards a better environment.
Recently, the WHO approved the usage of the world’s first malaria vaccine! After reviewing evidence from testing of the vaccine, the WHO is recommending broad usage of the vaccine. It significantly reduces the severity of malaria, and will help a lot of people.
By: Abhimanyu Rao
1.Imagine working on one single project for 60 years and putting your heart and soul into it. Syukuro Manabe, Giorgio Parisi and Klaus Hasselmann won the Nobel Prize for Physics. Messrs Sykuro Manabe and Klaus Hasslemann predicted climate change and Mr Hasslemann made a model that links weather and climate. Mr Parisi won the award for “ the discovery of the interplay of disorder and fluctuations in physical systems from atomic to planetary scales”
2. Lego is about to release its biggest set ever. They will soon release a 53 inch long replica of the Titanic (RMS Titanic) and the set will contain over 9000 pieces. It has been made on a scale of 1:1200. This amazing set will set the buyer back over 600 Dollars, but we aren’t here to talk about the price- only about how cool it is that an actual lego set of the Titanic is!
3. A temple that dates back to the 3rd Century BC has been excavated in Turkey. The temple unearthed is the entrance gate of the Zeus Temple from the ancient Greek city of Magnesia . The unearthed temple is to be restored soon, and some parts of the temple are also in a museum in Berlin. In the course of the next 15-20 year more areas of the city of Magnesia will be excavated and restored. Wouldn’t that look magnificent?
4. When spacecrafts are created, they are meant to fly in space, aren’t they? NASA’s DART spacecraft is deliberately crashing into a space object. What space object, do you ask? The DART is known as the Double Asteroid Redirection Test. It will crash into a nearby asteroid to test its capabilities of defending Earth from near earth dangers and will see by how much it can change its course.
5. As children it was always a dream to excavate or find a fossil. A 17 year old student didn’t exactly find a fossil, but found something on par with one. She volunteered for excavation and worked at a team looking for a 2000 year old port called Muziris, where they are looking for items from Ancient Rome. While digging near her uncle's house she unearthed an ancient Roman artefact! Imagine if all of us started digging around her house. I wonder what we will unearth? An ancient city maybe?
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