Two law professors experimented with acting like real-life corporate raiders — it didn’t go well

Tejon Ranch Co. is one of California’s oldest — one might almost say “antique” — corporations. What has become a landholding of 270,000 acres, situated in the largely-undeveloped territory between Los Angeles and Bakersfield, was first assembled in 1855, the company was incorporated in 1936 and it went public in 1973.

Frank Partnoy and Steven Davidoff Solomon teach about shareholder activism as law professors — Partnoy at the University of San Diego, Solomon at UC Berkeley. They thought Tejon Ranch would be an ideal subject for a real-life experiment: What would happen if they bought up Tejon stock themselves, then tried to jawbone its executives into taking steps to improve shareholder value, as though they were the kind of activist corporate raiders who make managements of big companies quake with fear?

Here’s a spoiler: It didn’t go well.

Tejon management made a show of listening to their proposals, then essentially blew them off. Having risked a significant share of their retirement nest eggs by assembling a combined stake of about $500,000, they escaped after about a year and a half with a modest gain of $55,000. But Tejon hasn’t really changed.

“There are thousands of companies that have never had an activist investor darken their door,” Partnoy told me. “One of the reasons is that it’s really hard. We wanted to see if we could succeed. But even with our knowledge and our connections and our expertise, we did not succeed in any meaningful way.”

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