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What Happens To A Stock When An Activist Liquidates A Position?

What Happens To A Stock When An Activist Liquidates A Position?

Valeant Pharmaceuticals Intl Inc (NYSE: VRX) investors were disappointed to see that popular vocal activist investor Bill Ackman finally abandoned his stake in Valeant for what was likely nearly a $4 billion loss on the trade.

On the surface, a heavily-invested activist finally throwing in the towel may seem like really bad news for a stock. However, history shows that the departure of an activist investor can actually be good news for certain stocks.

Departure Not A Definitive Positive Or Negative

Ackman bailed on J C Penney Company Inc (NYSE: JCP) back in August 2013 after becoming the company’s largest shareholder in 2010. In the year following Ackman’s exit, shares declined 15.0 percent.

Icahn Enterprises LP (NASDAQ: IEP) CEO and activist investor Carl Icahn invested heavily in Apple Inc. (NASDAQ: AAPL) back in 2013. After pressuring the company to commit more of its cash to capital return programs, Icahn dumped his shares in April 2016. It’s been less than a year since Icahn sold, and Apple shares are up 48.8 percent in that time.

Third Point Partners activist investor Dan Loeb resigned from the board of Yahoo! Inc. (NASDAQ: YHOO) back in 2013 after making more than $1 billion in profit on his investment. In the year that followed, Yahoo shares climbed 20.6 percent.

ValueAct activist investor Jeff Ubben dumped the firm’s 1.1 percent stake in American Express Company (NYSE: AXP) in fourth-quarter 2015. Ubben reportedly did not see eye-to-eye with American Express investor Warren Buffett. In the year following Ubben’s reported exit, the stock surged 38.3 percent.

So far since Ackman reported bailing on his Valeant investment on March 13, shares are down 11.8 percent.

Related Link:

Bill Ackman Is Out Of Valeant

Gadfly's Nisen: Valeant's 'Financial Wizardry' Doesn't Change The Long-Term Outlook


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