An activist campaign centered on such a strategy can take many forms, but it is virtually certain to take longer to pay off. In the case of Yahoo, Jeff Smith's Starboard Value disclosed a stake in the tech company more than a year ago, and Yahoo's core business was sold to Verizon in a $4.8 billion deal just this week.
When it comes to an activist campaign pushing for M&A or management change, investors should expect to spend a year or longer waiting for a deal to come, Wolosky said.
In early 2014, activist Carl Icahn kicked off a board battle with eBay, seeking to have the online auction house spin off Paypal. Months later, he'd give up that fight, but not his investment. He held onto his eBay stock.
Despite being beaten back by eBay's management temporarily, Icahn would ultimately get his way, and then some. The company decided the following year to spin out Paypal, and at that point the savvy fund manager decided to shift bets. With his option to take eBay or Paypal stock, Icahn took the latter. And eBay's board was likely relieved to see an agitator who once said he had "never seen worse corporate governance than eBay" moving onto another company. Today, Icahn still owns Paypal shares.
Other activist campaigns don't amount to a profit, or even to change. After starting 2016 saying he believed Macy's was a candidate for a private equity deal and a breakup of its brand from its real estate, in the form of a REIT, David Einhorn spent months watching the stock decline. In his letter to investors on Wednesday, Einhorn revealed that he gave up the ghost, and sold the stock at a loss.
Wolosky thinks spinoffs driven by activists are going to become increasingly prevalent, although few activists today are using language as pointed as the salty New York native's.
"That stigma has gone away," he said, and corporate boards, institutional investors and others have increasingly come around to the idea that they can, and should, work with the same activists they might have shunned years before.