Activists vs sitting ducks
With the economy stuck in neutral and companies struggling to grow, it is open season for activist investors. The Bulletproof Blog notes that Ralph Whitworth of Relational Investors won a board seats at HP and that there is very public agitation for change at Yahoo! and E*Trade. Commenting to Bulletproof, the National Investor Relations Institute counsels corporations to use social media to “begin a real dialog with these investors.”
Really? C’mon! By the time a serious activist is publicly agitating, it’s probably too late for the target company. First, the company will be saddled with its own track record of underperformance. Second, the company is probably doing a poor job at communication and will be ill-equipped to effectively engage using social media. They’ll be too slow, too defensive, too controlled by lawyers and bureaucracy. Third, it’s much easier to get attention with a negative message and activists know this. The company – because of its own track record – has a hard time rebutting and has limited credibility in advancing an alternate roadmap to what is advocated by the activists.
With deer season recently open in the New York State, hunters of all sorts are taking aim. The fact is that it is much easier to take a shot at Yahoo!, E*Trade or a host of other companies that have disappointed Main Street for years than it is to sight that eight pointer.