Anonymous Analytics goes after Corrections Corp. of America

Hedge funds are a powerful force that can be harnessed by activists to change how capitalism operates in our society.

A few years ago I launched a hedge fund: KarmaBanque. KarmaBanque’s idea is to bring activists and hedge funds together to leverage their mutual self-interest tying boycotts with short-sales to create web-enabled monopsonies (monopolies of consumers against producers). The hedge fund community was fine with the idea and the Washington Legal Foundation wrote a legal opinion endorsing the idea as something that was sorely needed in the capitalist system (as practiced in the USA and UK).  Unfortunately, the activist community was not ready for the idea. I met with leaders of the largest NGO’s in the world who all expressed distrust of an idea that engaged the markets in some way. They feared this would put off donors.

Times have changed. Today we may finally have the right combination of activists and opportunistic hedge funds who will deliver market justice to bad actors on the corporate stage.

Anonymous Analytics, a group associated with Anonymous has been shopping around for awhile looking for a suitable target to apply the shame and short-sale technique. They have decided on Corrections Corp. of America.

The report issued by Anonymous Analytics details why Corrections Corp. is a bad investment. Just like any Wall St. report, they dig into hidden risk factors that investors may not have taken on board.

“Anonymous points outs that state governments are increasingly enacting policy reforms designed to reduce their reliance on incarceration – including top CCA "customers" like California and Colorado.”

The message to hedge funds is to ‘short’ this stock (make negative bets selling borrowed shares in anticipation of a price fall) and wait for  these risks being recognized by the market at some point; triggering an outflow of funds and a price drop. Hedge funds have the power to ‘short’ a stock’s price to zero. Famously, Huntingdon Life Sciences Ltd., a UK medical research firm, was the subject of an activist-investor research report whereupon hedge funds sold-short that stock down to zero; forcing the company to leave the UK altogether.

Presently corporations have become efficient ‘risk-transfer’ mechanisms in that they transfer most of the risk of doing their business; interest rate risk, environment risk, etc., from their balance sheet to society’s balance sheet. (They privatize gains and socialize losses). Groups like Anonymous Analytics seek to reverse this trend and restore a more equitable balance of risk and reward in our capitalist economies. Once again, let me point out that the Washington Legal Foundation, in a report written by Larry Ribstein concluded that this type of ‘investor activism’ was legal and should be welcome by those who support free markets.

Additionally, I should point out, that to turbo-charge this type of activism: use boycotts. In other words, if the target of an activist campaign was Coca-Cola and enough activists around the world boycotted Coke this would trigger hedge funds to sell-short Coke’s stock. And as the boycott grew, so too the hedge fund's short-sales. If the goal of activists was to completely decapitalize Coca-Cola by encouraging hedge funds to monetize dissent and discount future earnings collapse based on current boycotts it would not be difficult at all to remove Coke as an ongoing enterprise.
Think of the jobs created by replacing duopolist Coke with 10 or 15 new competitors? Everybody wins (except Coke’s shareholders).

Anonymous Analytics deserves support for their efforts to restore balance to the economy not only for the elimination of bad actors in the corporate world but for the many jobs their actions will create as the result of the new, more competitive companies created in the wake of the collapse of these societal leaches.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.