Adam Kommel’s (and Wayne Gerard’s) company, aptly named Activist Shorts, is a research service that keeps tabs on free, publicly-available research put out by short sellers. Some of this research is the best research available for a particular stock. Some of these reports expose fraud and act as the catalyst for a stock going to zero. Examples include Muddy Water’s work on Sino-Forest and Jon Carnes’ work on Fab Universal. In those situations, I would say that these short sellers’ reports were the most important document that you could have read for that particular company- more important than the annual report.
There are two parts to Activist Shorts
- The @ActivistShorts Twitter account, which is free. I highly recommend following it. I read it regularly to find out about all the latest reports being released. You can read it for yourself on Twitter and quickly see whether it’s worth a follow.
- A paid subscription service, which can save time if you spend a lot of time following activist shorts (I kind of don’t).
The subscription service
Activist Shorts has a paid subscription service that adds a little more value compared to their Twitter feed.
Activist Shorts sends an email summary of all the latest activist short reports. Here’s an example for Melissa Davis’ report on The Habit Restaurants.
The emails succinctly summarize the content of reports being released. You don’t need to waste time reading hyperbole about the next “pharmaceutical Enron” or the next “Sino Forest”. I often find the unnecessary hyperbole and inflated claims to be tedious and a waste of time. The summaries do a good job in filtering that stuff out.
Secondly, the emails help you keep track of newcomers and people who are easy to lose track of. For example, Melissa Davis no longer works for The Street Sweeper so there was a point in time where I wasn’t following her work. (Activist Shorts also tracks investigative journalists like Melissa Davis and considers them to fall under the umbrella of “activist shorts”.)
Thirdly, the emails can help you keep track of activist shorts that you don’t follow closely. Personally, I ignore a lot of research reports because there are many activist shorts that I stopped paying attention to. The summaries can be helpful in case the activist short comes out with a report with substance to it.
- I don’t trust certain individuals because their past actions hurt their reputation. For example, some activist short sellers used to be the CEO of a public company that later accused them of fraud. (I don’t know if any of these claims were or will be proven in court.) For example, Detour Media’s 10QSB filing states that the company commenced an action against Andrew Left of Citron Research.
- I also don’t trust convicted felons like Barry Minkow and Sam Antar- mainly because Minkow is in jail for a second time. While my opinion is that many convicted felons are unfairly punished by the discrimination they face after getting out of jail, it seems that many human beings can’t change the way that they are wired. (My short selling generally involves researching scumbags and shorting their stocks. So it’s made me fairly cynical about those with a crooked history.)
- And then there are weird cases like the investigative journalist who was convicted of harassing her (ex-)boyfriend’s daughter. You can simply read her website and see that she that her story doesn’t add up. e.g. She pretends to care about serious journalism, yet she does not respect the privacy of her ex-boyfriend’s family and continues to disparage his daughter.
- Sometimes I ignore certain parties because I read one report from them and did not like the report. I assume, rightly or wrongly, that their other research is not worth my time.
In the end, the summaries can be a helpful way to make sure that you don’t overlook any research reports with quality original research.
The Activist Shorts website has summaries of all the major events surrounding stocks targeted by activist shorts. Often these summaries are succinct and brief. In the case of Valeant, there is so much happening that the summary became quite lengthy. Activist Shorts’ summary begins in 2013, when Jim Chanos talked about the stock in a CNBC interview.
If for some reason you would like a refresher on Valeant, Activist Shorts’ summary would come in fairly handy as there is so much material to wade through.
The website also has a database where you can search activist short reports based on criteria such as:
- The activist short. If you discover an activist short that you like, you can review all of that party’s old campaigns.
- Reverse merger. You can specifically look for reverse mergers that have been targeted by shorts. I didn’t find this that useful because I think that reverse mergers are a great place to look for scumbaggery and manually went through a list of every US-listed Chinese reverse merger a few years ago. The Activist Shorts database is a great place to start though if you are as cynical about reverse mergers as I am.
Activist Shorts releases reports (roughly every quarter) that highlight some of the activist campaigns out there. The front page of the ActivistShorts.com website has links to their publicly-available reports (e.g. Spring 2015 Quarterly Report and 2014 Year in Review).
My thoughts on Activist Shorts
Overall, I don’t think that I’m part of Activist Shorts’ target market for the subscription product. I don’t have a huge problem with idea generation because my screens are good. I have a spreadsheet where I keep notes on around 1,454 bad companies. My problem is that I generally have to do my own research (or hope that somebody like Adam Feuerstein wrote a few words about the stock). For example, I blogged about PVCT in March 2014. It would be two months later before an activist short came out with a report on PVCT. While I did not have access to Activist Shorts back then, it would not have helped with my research problem.
You may not have the same unique “problem” that I have. You may not have a spreadsheet of 1,454 stocks that you keep notes on. If you have an idea generation problem, Activist Shorts may help. Start following @ActivistShorts if you haven’t already. If you like what you see, you can e-mail akommel [AT] activistshorts to request a trial or to see sample content.
*Disclosure #1: I received free access to Activist Shorts to review it. (Being the miser that I am, I would not be reviewing it if I had to pay for it.) My access should lapse today.
*Disclosure #2: I am short VRX and PVCT. I shorted GSAT before it was an activist target. I covered my GSAT short a long time ago.