Activist investors can often be a thorn in the side of companies, but often they increase value through uncomfortable changes in the corporate culture and the business model. No doubt, Carl Icahn is probably saying “I told you so” to eBayafter management, a year later, took his strong suggestion that it spin off Paypal. Although he wasn’t able to agitate Pepsi management to split the company up, he might create a turnaround for the very troubled fast-food pioneer McDonald’s, whose stock has seen staggering declines.
Same store sales for McDonald’s have fallen through the floor, and part of the blame has been laid at the feet of the healthy eating trend for which its former child company, Chipotle Mexican Grill, ironically, is primarily responsible in the casual dining space with its natural and organic offerings. Another possibility is that McDonald’s, like many classic brands, has grown stale and may need an activist investor to generate new ideas for the decades-old burger joint.
McDonald’s stock, however, poked its head up briefly on Monday, only to drop back down again, and there is speculation on Wall Street, as reported by Benzinga, that activist investor Carl Icahn may take a stake in the company. While these are mere rumors and might not pan out, Sterne Agee analyst Lynne Collier thinks it is a realistic scenario, “I think it is possible. McDonald’s has an unbelievably strong record and has had a little bit more of a challenge in the past few years.” Another reason why Icahn may want to buy some shares of the company is that it is cheap, “Relative to its historical multiple and its competitors, the stock is undervalued, ” Collier added.