SEC 1992 deregulation legalized wolf pack activism and revived corporate raiding

Evidence

One of the core problems with hedge funds is that they are the new home for the corporate raider, now rebranded as an “activist investor” or “hedge fund activist.” In the late 1980s, corporate raiders were curtailed by public scrutiny, anti-takeover legislation, and defensive corporate strategy (such as various shareholder actions, called “poison pills,” that go into effect when a hostile takeover is attempted). Pressured by lobbyists, including an organization launched by infamous corporate raider T. Boone Pickens, financial deregulation at the SEC in 1992 permitted new forms of communication between investors (resulting in investor cartels), between investors and company management (no longer considered insider information), and between investors and the public (announcing voting intentions in order to sway other voters). Corporate raiding could now occur under new auspices; a “wolf pack” of investors, garnering the support of institutional investors, can collectively intimidate corporate management and make demands. — Andrew deWaard, Derivative Media, 145

Categorization

• XREF: Connects to the reader’s private equity rollup thread: hedge fund activism here mirrors PE’s financial-engineering playbook (layoffs, buybacks, asset sales).