Dissident shareholders who publicly disclose their letters to management may be doing so with the intention of reaching a wider audience. The investors may actually be reaching out to fellow large shareholders in hopes of attracting allies.

According to FactSet, engaging a company’s management team in order to indirectly reach out to other shareholders is no longer necessary. Whereas in the past, costs and strict regulations limited the amount of information an activist investor could disseminate, changes in regulations and policy, as well as the advent of the Internet, lowered the barriers. Now activist shareholders no longer have to file a proxy statement in order to threaten a proxy fight.

The changes have made the public disclosure of letters sent to a company’s executives or its board of directors commonplace. FactSet calculates that an average of 64% of all proxy fights since 2006 have included a publicly disclosed letter to the company from an activist investor. The decision to disclose a letter varies by firm, however. Icahn Associates has disclosed its letter in 78% of proxy fights and Starboard Value has done so 69% of the time, while Western Investment has only disclosed its letters in 39% of proxy fights.

There appears to be a pattern of success with releasing the letters. In 101 out of 173 activist campaigns, the investor labeled as being the dissident by FactSet SharkRepellent won the challenge. Letters were also publicly disclosed in 67% of the proxy fights that were settled before a shareholder vote occurred. This suggests public disclosure could be part of a broader plan to get a company to agree to changes.

FactSet acknowledges that there could be other motivations behind utilizing public disclosure. An activist investor firm may release its letter to bring media attention to a specific issue. Publicly releasing the letter can also reveal the true intent of the activist investor. Doing so would be logical when a company alleges that the activist’s demands are not in the best interest of all shareholders. FactSet clarifies this last suggestion by pointing out that activists disclosed their letters in 78% of situations where the dissident had the support of Institutional Shareholder Services. (ISS is a proxy advisor to institutional investors).

Source: “In Proxy Voting, Public Disclosures Often Lead to Private Agreements,” Anthony Garcia, FactSet Insight, January 5, 2015.