Anonymous Analytics goes after Corrections Corp. of America
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
“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
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
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.