There is nothing like a short attack or activist situation to make management really appreciate investor relations.
Short attacks are really about exploiting openings in a company's narrative.
Shorts can attack because the company and Investor Relations are not curating content in a way that maintains control of the narrative. An investor relations program that signals get off the grass adds fuel to the fire.
Shorts look for the following openings in your narrative:
Management: Executives doing their best impersonation of Ferris Bueller attract short seller attention. Conversely, executives spending too much time away from the business attracts attention, too. Executives need to act and interact with investors in a way that confirms the size and stature of the firm.
Website: The web presence fails to convey the stature and position of the company. Websites that lack important investor materials or make them hard to find attract short interest.
Investor Deck: Companies need an Investor Deck that allows an analyst to initiation on the company in a weekend. The Investor Deck is distinct and different from an Analyst Day Deck and a Quarterly Earnings Deck. Trying to pull double or triple duty with these materials obfuscates the story and attracts short interest.
Earnings: Earnings materials that fail to highlight key catalysts, have no structure or fail to focus on golden metrics attract short interest. Failure to provide proper disclosures are a problem.
Twitter: Management teams that Tweet incessantly attract short interest. See the above, if management is Tweeting all the time, who is running the business?
The Biggest Mistake: Not Focusing on the Competition
A failure to optimize the discussion around your competition represents the easiest point of exploitation for a short attack. If a company says it has no true competitors, then investors will create some, and you may not like them. Without a defined set of competitors, investors have no third parties to further vet your story. A key benefit of a robust competitive environment entails investors bouncing your ideas off of other management teams and vice versa.
Companies have three chances to define the competitive set in the 10-K, in the Proxy, and in the Investor Deck. Failing to signal to investors that you have a defined competitive set suggests you may be hiding something or not on the up and up.
Remember, short attacks are about exploiting openings in a company’s narrative. The easiest way to relinquish control of your narrative is by failing to optimize the discussion around competition.
The key is to know when you can push back versus hiring outside resources
