Shining a Light in a Dark Corner: Does EDGAR Search Activity Reveal the Strategically Leaked Plans of Activist Investors?

Abstract

We provide evidence of a network of information flow between activists and other investors prior to 13D filings. We match EDGAR search activity to investor IP addresses, identifying specific investors who persistently download information on an individual activist’s campaign targets in the days prior to that activist’s 13D disclosures. This outside investor’s knowledge of pending activist campaign plans seems to benefit both parties: the informed investor, unnamed in the 13D, increases its holdings in the targeted stock prior to the price surge upon 13D disclosure, while the activist earns voting support that increases their likelihood of pursuing and winning a proxy fight.

Does Shareholder Activism Create Value? A Meta-Analysis

“…More confrontational approaches may have a greater impact on firm value. Flugum et al (2022) show that outside investors' knowledge of pending activist campaigns increases activists' likelihood of pursuing and winning a proxy fight. Denes et al (2017) report value created by proxy fights (arguably one of the most confrontational methods often intended to overcome managerial resistance to proposed changes) of 6.77%, which can be compared to much lower estimates for direct negotiations (0.26%), and shareholder proposals (0.06%).…”