Memo: "Be Prepared For Attacks By Hedge Funds"
Wachtell, Lipton, Rosen & Katz
Be Prepared For Attacks By Hedge Funds
In this environment of attacks by hedge funds, including against some of our largest and most well-known companies, it is more critical than ever for companies to be prepared. Companies need to:
Be acutely aware of where they stand in relation to their peers. Relatively poor performance, regardless of the reason, can make one an easy target.
Consistently articulate the company’s business and financial strategy in a way that is meaningful and understandable.
Carefully monitor analyst reports, particularly for suggestions of strategic changes the company could make. Company officials must be careful when discussing potential strategies with analysts, and “half-baked” ideas for the company’s strategic direction must be refuted or otherwise addressed immediately. Frequently, hedge funds are “turned on” to a company by an analyst who one way or another got an idea for a way to get a quick increase in the price of the stock.
Have in place sophisticated stock watch programs which alert management to new large stockholders and non-ordinary course patterns of stock purchases.