Is it possible to influence a company's actions by buying stock?

Question

I have a question about shareholder activism. Since the Dakota Access Pipeline has major support by the general population, would it not be possible to buy their stocks, bring down the price of the stocks and keep it there until investors pull out because it is financially unwise to these investors? Would it alternatively be possible to buy enough stock to have a voice in the operations of the company? Could someone please explain how these things work? Thanks

Answer 1

To quote Adam Smith, 'Everything is worth what its purchaser will pay for it'.

In this case, that means, the value of a stock is equal to the price that someone will pay for it. If you buy shares in a company, the number of people who want shares in that company has just gone up by 1. If you buy shares in companies profiting from the DAPL, you are increasing demand for those shares. You are actually making those shares more valuable, not less. If you bought all those shares, then you could simply shut the pipeline down. But that means you'd be spending billions of dollars to do so - and that money would go to the people who own the company now.

The concept of 'Shareholder Activism' that you refer to, is actually more that an individual who owns a substantial number of shares (usually in the 10% ballpark) will become outspoken on the direction of the company, and attempt to elect board members who will take action to suit their liking. This is done to increase the profits of the company, so that the shareholder can make more money off of their investment. It is very expensive, and not generally done for reasons of 'ethics', unless those ethics align with a view to long-term profit (in this case, you'd need at least $1Billion to buy enough of a stake in the DAPL to make a difference).

What you may instead want to consider is 'ethical investing'. This refers to the concept that you should only put your investments in companies which act ethically. For example, you could buy shares in a solar company, if you felt that was an ethical industry. In this way, you drive up demand for those types of companies, and reward the business owners who act in that fashion.

Answer 2

Energy Transfer Partners, LP (stock symbol ETP) is the parent company of Dakota Access LLC, the developer of the Dakota Access Pipeline. Since ETP is a publicly traded company, it is certainly possible to purchase the stock.

To answer your questions:

Would it not be possible to buy their stocks, bring down the price of the stocks and keep it there until investors pull out because it is financially unwise to these investors?

You cannot artificially bring the price of a stock down by buying the stock. Purchasing large enough amounts would theoretically cause the price to go up, not down.

You could theoretically cause the stock to go down by shorting the stock (borrowing shares and then selling them), but it would take a lot of shares to do this, and may not be successful. If not successful, your losses are potentially unlimited.

Would it alternatively be possible to buy enough stock to have a voice in the operations of the company?

Yes, you could theoretically purchase enough of the stock to control the company. The market capitalization of ETP is currently $17.9 Billion; if you owned half of the stock, you would have complete control of the company. But buying that much stock would certainly influence the price of the stock, so it would cost you more than half of that amount to buy that much stock.

You could get yourself a voice at the table for less without owning a full half of the stock, but you would not have full control, and would need support from others to get the outcome you want.

Alternatively, someone determined to exert their influence could theoretically make an offer to purchase the Dakota Access subsidiary from ETP, which might be less costly than purchasing half of the entire corporation.

Even if an extremely wealthy person were to try one of these options and destroy this company, it wouldn't necessarily stop another company from building something similar. The investors you purchased the company from would have billions of dollars to do so with.

Answer 3

Another form of 'shareholder' activism. You might be able to buy a single share, which it seems would cost around $35, attend the AGM, and ask questions and/or shout or sing and delay proceedings.

There would certainly be security guards or police ready to remove protesters at an AGM.

Answer 4

You can execute block trades on the options market and get exercised for shares to create a very large position in Energy Transfer Partners LP without moving the stock market.

You can then place limit sell orders, after selling directly into the market and keep an overhang of low priced shares (the technical analysis traders won't know what you specifically are doing, and will call this 'resistance').

If you hit nice even numbers (multiples of 5, multiples of 10) with your sell orders, you can exacerbate selling as many market participants will have their own stop loss orders at those numbers, causing other people to sell at lower and lower prices automatically, and simultaneously keep your massive ask in effect.

If your position is bigger than the demand then you can keep a stock lower.

The secondary market doesn't inherently affect a company in any way. But many companies have borrowed against the price of their shares, and if you get the share price low enough they can get suddenly margin called and be unable to service their existing debt.

You will also lose a lot of money doing this, so you can also buy puts along the way or attempt to execute a collar to lower your own losses. The collar strategy is nice because it is unlikely that other traders and analysts will notice what you are doing, since there are calls, puts and share orders involved in creating it.

One person may notice the block trade for the calls initially, but nobody will notice it is part of a larger strategy with multiple legs.

With the share position, you may also be able to vote on some things, but that solely depends on the conditions of the shares.

Answer 5

Yes and no. This really should be taught at junior school level in a capitalist country but that is a different argument. A company is influenced by its shareholders but not in the way you are hoping. This is the only area where a Company must behave democratically with one share one vote. If you own one share in a company (specifically a voting share), then you are entitled to attend an AGM where you will have a vote on issues presented by the board. You might have an opportunity to make a statement or ask a question at the AGM, but I wouldn't rely on it. You will not be able to influence the companies behavior beyond that unless you control enough shares to influence the board. Notice I said 'control' not 'own'. If you get other shareholders to agree to vote with you, then you effectively control their shares. Shareholders are there to get a return on their investment, so you must convince them that they will get a better return by agreeing with you then by following the board (that they put there!). Convince them that (for example) a trespass lawsuit will rob the company of more value then the profit to be made and they might agree to not trespass. Morals, ethics, justice etc., are human attributes and since most shareholders are other corporations not humans, they have no place in your arguments with one exception; Goodwill is a value that appears on a balance sheet and you might be able to use emotional arguments to show that there is a risk of a loss of goodwill from the proposed actions. You can make your argument stronger by generating media pressure on customers and suppliers of the company to make critical public comments.