Activist short sellers: what are their performances?

Short selling has existed since the inception of the stock markets and has continued to develop over the years. More recently, this practice became popular following the Enron scandal in 2001 and the Great Financial Crisis of 2008. However, thanks, among other things, to the development of the media, we have seen the emergence of activist short campaigns in recent years. The objective is to publicly disclose a short selling position to convince investors that certain companies are overvalued or subject to potential fraud. Activist short selling campaigns have been multiplying since then. The objective of this paper is to evaluate the performance of these activist short sellers. To achieve this purpose, we conducted an event study on 247 companies shorted by 17 US activist short sellers between the 1st of January 2010 and the 31st of December 2020. This allowed us to analyse the abnormal returns of the companies targeted by the activists and we obtain a cumulative abnormal return of -14.82%. A classification of our shares has allowed us to find that the most successful activist campaigns are those targeting American or Asian stocks and generally having small market capitalisations. We finally completed our analysis by conducting two semi-structured interviews and one structured interview with two American activist short sellers and one European long activist.