The investor activists such as Icahn are good for the shareholders, businesses and management to the extent that they help create a case for an institution hence the fundamental advantages are achieved. It implies that the investor activists’ help in laying out plans hence improve and drive the organization towards the creation of value (Venkiteshwaran, Iyer and Rao, 2010 pp.45). In other words, they are good for shareholders since they may help in making out good investment decisions. Hence the constructive changes and positive stock returns are achieved.
A realistic explanation why investor activists leave the target institutions is as a result of pump and dump. I believe it is the case since the investor activists use their positions to put pressure on the boards into the plans which they hold that they are values for shareholders. Later, they dump the stocks when the prices increase hence the company is overleveraged and cannot invest in the long-term.
Icahn is referred to as a corporate raider of dark legend since he used his tactics such as taking companies privately to buy shares especially those which were undervalued hence he would push changes through the management and increase returns. On the other hand, he was called the champion of shareholder activism since his activities were seen as legitimate and were welcomed by most organizational investors (Bebchuk, Brav and Jiang, 2015 pp.10). He would force companies to buy shares at a high price and issue the shareholders with the dividends and profits which they deserved. The most appropriate term for Icahn is a champion for shareholder activism since he is associated with investments which cause changes in the institutional policies hence the profitability for the target companies in the long-run is achieved.
Venkiteshwaran, V., Iyer, S.R. and Rao, R.P., 2010. Is Carl Icahn Good for Long?Term Shareholders? A Case Study in Shareholder Activism. Journal of Applied Corporate Finance, 22(4), pp.45-57.
Bebchuk, L.A., Brav, A. and Jiang, W., 2015. The long-term effects of hedge fund activism (No. w21227). National Bureau of Economic Research.