Surprise Attack – How Activist Investors Avoid Being Exposed

9 December 2015

By Rana Abdel Fattah

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IR Magazine recently released its winter edition for 2015, and we’re very excited to note that Q4 has been featured in an article written by Carol Wolf, entitled: Surprise Attack: Activist investors use options trading to avoid detection. The article highlights some great insight from our own Darrell Heaps, Q4 CEO and Adam Frederick, Senior VP of Intelligence about investor activism in the capital, particularly how they’re making use of the options market to gain their positions in companies without being detected by traditional surveillance providers.

If you subscribe to IR Magazine, we highly recommend checking out the full article.

Below, we briefly highlight Darrell and Adam’s contribution to the article.

On the use of options by activist investors, Darrell notes:

“The use of options by activists to build ownership positions is only going to increase in frequency. The nature of the options market lowers the cost of building positions, while also reducing the number of shares in common that can be observed through settlement analysis. This allows activists a cheaper route to build a sizable position both quickly and under the radar of traditional surveillance.”

Darrell also notes that traditional surveillance providers don’t cover the options market, which can leave companies open to additional activist risk

“Due to the complex nature of derivatives, traditional market surveillance firms don’t cover options trading. Without that information, the ability of IROs to take proactive measures is severely hampered. When an activist buys options, public companies have less time to make contingency plans related to the action and to win the battle for investor and public opinion.”

Further in the article, Adam notes how companies can leverage options market data to monitor investor sentiment along with staying ahead of activist activity.

“…companies don’t have to remain in the dark. Predictive analysis techniques derived from datasets focused on activism, volatility, sentiment and options intelligence are emerging as the next generation of surveillance intelligence. The power of big data and predictive analytics is incredibly robust and offers tremendous potential for market intelligence and stock surveillance.”

For more, check out the full article here, on page 85.

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