By: Katie Gomez

When news broke that Elliott Investment Management had built a stake in London Stock Exchange Group (LSEG), shares jumped 8% in early trading. This is a textbook example of how activist investor campaigns create immediate, predictable, and highly tradable market reactions. Elliott’s involvement isn’t random: the legendary activist fund has forced strategic changes at corporate giants including BP, PepsiCo, and Honeywell, establishing a track record that makes its mere presence a catalyst for unlocking value.

While most traders chase the initial disclosure pop and miss the real opportunity, savvy investors understand that activist campaigns follow a multi-phase lifecycle offering multiple entry points over months or even years.

What Happened: The LSEG Case Study

LSEG stock had fallen over the past year amid AI disruption fears affecting data and analytics firms, despite strong underlying fundamentals that are attractive to investors. Elliott quietly built a stake near the UK’s 3% disclosure threshold and began engaging LSEG management on operational performance, capital strategy, and potential buyback programs to unlock value. Notably, there was no push for restructuring, such as selling the exchange business. The market validated Elliott’s thesis: shares spiked 8% on disclosure before settling. This reflects the typical campaign—initial pop grabs headlines, but deeper trading opportunities arise during the sustained engagement phase.

The Activist Campaign Lifecycle: Four Tradeable Phases

Understanding the predictable pattern activist campaigns follow reveals multiple profit opportunities beyond just the initial headline pop:

Phase 1: Silent Accumulation (Hidden Opportunity)

• Disclosure thresholds specify the level of ownership at which investors must publicly report their position.
• Activists quietly build their ownership in a company by purchasing shares without exceeding the public disclosure thresholds (typically 5% in the US and 3% in the UK). Disclosure thresholds specify the level of ownership at which investors must publicly report their position.
• Shares are weak; negative sentiment dominates; fundamentals are ignored.
• Trading opportunity: Identify companies likely to become activist targets before any public announcement by looking for signs such as increased trading volume or undervalued fundamentals.

Phase 2: Public Disclosure Pop (Don’t Chase)

• Shares initially spike 5-15% on disclosure of activist stake.
• LSEG’s 8% jump is a textbook example of this reaction.
• After the initial spike, the company receives more news coverage from traditional and financial media outlets, analysts may issue positive reports or upgrade recommendations, and individual investors may join in due to FOMO.  
• Trading Opportunity: Wait for post-spike pullback; avoid chasing.

Phase 3: Engagement & Volatility (The Sweet Spot)

• 2-12-month pressure campaign unfolds publicly
• Demands, proxy battles, and negotiations drive volatile news flow.
• Stock swings on campaign developments and rumors.
• Trading opportunity: Trade the range, accumulate shares on weakness during the campaign.

Phase 4: Resolution (Exit or Hold Decision)

• M&A deals, management changes, buyback announcements, or board seats secured.
• Total gains for investors can often reach 20-40% when measured from the low share price before any activist stake is disclosed.
• The campaign ends in an activist’s exit or in declared success.
• Trading opportunity: Take profits on news or reassess if fundamentals genuinely improved

Identifying Activist Targets Before Disclosure

• The activist target profile is remarkably consistent:
• Look for undervalued companies trading at low P/E or P/B ratios versus peers (despite solid fundamentals).
• Stock prices down 20%+ from recent highs
• Cash-rich balance sheets enabling aggressive buybacks
• Fixable operational problems rather than existential business model threats
• Market caps above $1 billion (making them worth an activist’s time and resources).

Red flags that attract activists:

• Conglomerate discounts from unrelated business units
• Poor capital allocation (i.e., cash hoarding without shareholder returns)
• Governance issues with entrenched underperforming management
• Sector-wide selloffs: creating fundamental disconnects ripe for exploitation.

LSEG checked every box: down significantly despite strong cash generation, suffering from AI disruption fear narrative, offering clear operational margin improvement opportunities, and sporting a $40B+ market cap (large enough to justify Elliott’s substantial resource commitment to a multi-month campaign).

Trade Ideas Scanner Setup for Activist Plays

Systematically hunting activist opportunities requires multi-layered scanning across the campaign lifecycle.

For pre-disclosure target identification, filter for:

• Market caps above $1 billion
• Price performance down 20%+ from 52-week highs
• P/E ratios below sector median despite solid earnings
• Balance sheets showing cash per share exceeding 15% of market cap
• Unusual volume spikes suggesting potential accumulation
• Institutional ownership changes (i.e., large investors buying or selling stock as documented in quarterly 13F filings.

For ongoing monitoring during engagement phases:

• Set alerts for proxy fight announcements signaling an escalation.
• Changes in management or board composition indicate progress.
• Buyback authorization news validates activist demands.
• Activist stake changes reported in amended filings where increasing positions signal continued conviction.

Elliott’s Playbook, Trading Strategy & Risk Management

Elliott’s activist playbook typically demands aggressive share buyback programs, margin improvement through cost-cutting, strategic focus by exiting non-core businesses, and management accountability with occasional leadership replacement – all tactics likely targeting LSEG through enhanced buybacks beyond the current £1 billion program. The best trading opportunities come from identifying undervalued targets before public disclosure using systematic screening, or accumulating shares during engagement-phase pullbacks when impatient traders exit on campaign delays.

However, it is important to maintain realistic risk management. Position sizing should cap at 2-5% of your portfolio per activist play, diversify across multiple situations rather than concentrate, acknowledge the months-to-years time horizon required, and set clear stop-losses if the fundamental thesis breaks down or the activist unexpectedly exits.

Capitalizing on Activist Campaigns

The LSEG case shows why activist interest follows sentiment extremes. While the data and analytics sector suffered from AI disruption fears, LSEG was forming partnerships with AI leaders such as Anthropic and Microsoft. Elliott identified this valuation disconnect. Activist campaigns repeat this predictable, multi-phase opportunity: the LSEG situation provides clear entry points beyond just the initial 8% disclosure move. Use Trade Ideas to build activist target watchlists that filter for the profile characteristics we’ve outlined, and start capitalizing on this profitable pattern.