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.
Website: The web presence fails to convey the stature and position of the company.
Investor Deck: Companies need an Investor Deck that allows an analyst to initiation on the company in a weekend, separate from an Analyst Day or Earnings Deck.
Earnings: Earnings materials that fail to provide proper disclosures are a problem.
Twitter: Management Tweeting too much; 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.
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.
