Vultures in the Boardroom: How Activist Investors Are Destroying California Innovation

For the California Property Rights Association, the story of Southern California’s Masimo Corporation is more than a business dispute; it's a cautionary tale about the destruction of property and the corrosion of corporate integrity.

For over 30 years, founder Joe Kiani built Masimo from a garage startup into a revolutionary medical technology company, where it became a titan of innovation. But in the past year, we’ve witnessed how quickly an activist hedge fund, Politan Capital, can seize a celebrated company and systematically dismantle it, trampling its success and torching its legacy.

This hostile takeover, which occurred in September 2024, was not a rescue mission. It was a raid. With the backing of institutional giants like BlackRock, State Street and Vanguard, Politan ousted the founder of Masimo and installed its own hand-picked leader, Quinton Koffey — an individual with no experience running a complex medical device company. Shareholders who expected the stock to rise from $150 to $170 have been sorely disappointed and a year later the stock has stagnated, reflecting the profound damage inflicted by the new management.

The company is not growing; in fact, it is contracting significantly.

The new leadership’s actions reveal a shocking disregard for maximizing both for the history and integrity of the company, as well as shareholder value. In a series of baffling decisions, Politan-controlled company has:

• Scuttled Life-Saving Products: The company abruptly canceled a portfolio of FDA-approved consumer health products, including a monitor to prevent opioid overdose deaths and another to protect newborns from SIDS. In a move that defies all business logic, they even refused an offer from the company’s original founder to purchase these product lines, opting instead to simply terminate them.

  
  

• Wasted Billions in Assets: The Politan-controlled board has squandered upwards of $3 billion in company assets. Their mismanagement of a patent lawsuit against Apple allowed the tech giant to escape a multi-billion-dollar injunction, which created a devastating and entirely avoidable loss for Masimo shareholders.

  
  

• Engaged in Suspicious Self-Dealing: The new management sold Sound United, a highly profitable audio division, to a Samsung subsidiary for a mere $350 million. This deal significantly undervalued the business — one of its headphone brands alone was growing at triple-digit rates and projected to generate over $500 million in revenue. The fire sale becomes deeply suspect when one connects the dot to realize that Politan’s chief backers, BlackRock and Vanguard, are major shareholders in Samsung. The deal effectively grants Samsung a virtual monopoly over parts of the audio market, enriching the very institutions that helped Politan seize control.

Beyond the destruction of physical and intellectual property, Politan’s leadership has shown a complete disregard for contractual rights. They have initiated frivolous and costly "lawfare" against the company’s founder, refusing to honor an employment agreement that has been in place since 2015 and which was validated by the courts as a "product of serious arms-length negotiations."

Since Politan took control, Masimo's reputation for meeting its commitments has collapsed. They are doing precisely what they accused the prior leadership of: mismanagement and poor governance. On the contrary, its original founder continues to innovate in the face of the challenges and contribute to public health. Since departing Masimo, Kiani has continued work to revolutionize diabetes therapeutics; improve ECMO Therapy; streamline diagnoses of compartment syndrome, and support advances in regenerative medicine and stem cell therapy. He has persevered.

What is happening at Masimo is an affront to every shareholder, employee, and innovator in California. It is a stark example of how activist investors can exploit the currently flawed system to enrich themselves at the expense of all other parties. These corporate raiders seize control, pick apart the assets of the company, break commitments, and leave behind a carcass of what once thrived. This isn't value creation at all; it's value extraction, and it is destroying a California success story before our eyes. Moreover, if it can happen to Masimo, it can happen to any innovative company. We must demand accountability, transparency, and reforms to our current system in order to protect innovators from these vultures in the boardroom.