This medium-sized high-tech company found itself in the cross-hairs of an activist hedge fund with a long history of taking positions in a company and then launching a strategy to capture board positions and unseat top management. Its record guiding organizations was spotty and in some cases clearly negative.
After a series of seemingly friendly visits with the CEO to learn more about the company and his strategy for growth, the hedge fund fired the first salvo by upping its ownership and issuing a scathing press release criticizing management and the board. Neither the CEO nor his team had experience with such contests.
Problem
While the hedge fund’s criticisms were unfounded, the constant barrage of SEC filings and press releases had greatly distracted management. As new investors with significant positions – also from hedge funds – surfaced and joined in the attacks, pressure mounted on the CEO from the board to devise a response strategy. He needed to demonstrate to stakeholders that his stewardship was in their best interests. Uncertainty about how to respond led mostly to silence which was confusing employees and investors.