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Why do hedge funds take a stake in the firm before announcing their decision to take...

Why do hedge funds take a stake in the firm before announcing their decision to take an activist role?

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Activist hedge funds are those who take part in company branding, operations, management decisions and even sale of company. So they kind of become controlling party in the company . Also hedge funds are known are unconventional strategies to general abnormal profits thus they take like to take stake in a firm so that they can apply their strategies to turn around less profitable company into more profitable. And as they announce that they are going to work on this company, it provides people with a positive outlook that now new management of hedge fund will be going to work better than old management and thus trust is built in the company.

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