Jeff Katz is a partner in Ropes & Gray’s corporate department, and regularly works on shareholder engagement and activism matters. Annie Hancock is an associate in the litigation department, and works on transactional and securities litigation as well as government enforcement matters. This post is based on a Ropes & Gray publication by Mr. Katz and Ms. Hancock. Related research from the Program on Corporate Governance includes The Long-Term Effects of Hedge Fund Activism by Lucian Bebchuk, Alon Brav, and Wei Jiang (discussed on the Forum here); The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here).
In recent years, anonymous online hit pieces against public companies have become an increasingly common and effective form of short activism. Given their success in driving down stock prices, anonymous online short campaigns are likely here to stay. Anonymous online short attacks pose unique challenges to public companies. In order to defend successfully against anonymous online short attacks, public companies must have ready-to-execute plans in place—whether or not an online short attack appears imminent.
This post has five main sections: Section I discusses the rise in anonymous online attacks, Section II analyzes the effectiveness of short seller campaigns, Section III discusses how anonymous short attacks are waged, Section IV analyzes the challenges that anonymous online attacks pose for public companies, and Section V discusses different considerations in determining whether and how to respond to anonymous online attacks, and the strategic decisions required to successfully defend against them.