A corporate raider gains a controlling fraction of the shares of a poorly-managed company and replaces the board of directors. How does the corporate raider hope to make a profit in this case?

Question

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The corporate raider hopes to make a profit by the rise in the value of the shares held by the raider when the new board of directors is judged to be superior to the ousted board of directors. This is because the raider gains a controlling fraction of the shares, which means the raider stands to benefit from any increase in the value of the company's shares. By replacing the board of directors with one that is perceived to be better able to manage the company, the raider hopes to increase the company's performance and, consequently, the value of its shares. This, in turn, will increase the value of the shares held by the raider, allowing the raider to make a profit.

A Corporate Raider Gains a Controlling Fraction of the Shares