The impact of selling shares

Another Walker snippet (page 61). It has some implications for divestment as a strategy of seeking to achieve change:

Depending on the nature and terms of the relevant fund mandate, it may be the fiduciary responsibility of a fund manager to sell stock in a particular situation, and the greater the liquidity of the market, the greater will be the availability of this option. The signal of any associated fall in the stock price and of change in the share register is one means of transmitting a message from owner or investor to an investee company of doubts about its market valuation, strategy or leadership.

But in many cases such a signal may be disregarded or will be relatively ineffective as an influence. Even if it is seen as conveying a strongly negative message, it is more likely to be a blunt instrument than one targeted at a specific change in company leadership or direction. If the new holder of stock that has been sold is not ready or in a position to promote change, the combination of the sale and purchase transactions will have achieved little or nothing in terms of owner influence on the behaviour or policies of the investee company beyond an increase in its weighted average cost of capital, and possibly an increased vulnerability to takeover.