M&A, News

Potential New Way To Create Value For Shareholders: Issue More Press Releases

I always feel bad bringing you academic papers because inevitably they’ve been on SSRN for, like, two years, but this one is new to me anyway and good glaven are these charts clever:

So these guys (Kenneth Ahern and Denis Sosyura of Michigan) went and looked at a bunch of stock-for-stock mergers. And they looked at the uptick in news coverage after those mergers were announced – and, far more interestingly, before they were announced but after negotiations had started (which they found out by reading the “Background” in the merger proxy) . Then they divided those mergers into (1) fixed exchange ratio mergers, where the acquirer could minimize the price it paid by pumping up its stock just before signing the merger (because buying a $540mm company for AAPL shares requires 1mm shares now, but would require many more/fewer if AAPL were not so over/underpriced, take your pick), and (2) variable exchange ratio mergers (“we’ll give you $540mm worth of stock based on whatever our stock price at closing” or more complicated versions thereof), where the acquirer could minimize the price it paid by pumping up its stock just before closing the merger. Then they charted where there were more – largely positive, company-driven, press-release-based – articles than usual. And lookit that!

Or if you like, like, words and numbers:

Our first set of empirical results shows that bidders in fixed exchange ratio stock mergers increase the number of press releases after they privately begin merger negotiations and before the public announcement of the merger, during the period when the stock exchange ratio is established. In contrast, floating exchange ratio acquirers show little difference in press release issuance during this time. In difference-in-difference regressions, we find that fixed ratio acquirers issue 9 extra press releases during the average negotiation period, a 10 percent increase compared to baseline averages.

The increase in media coverage has a significant and positive effect on stock returns, consistent with prior studies, but also has real implications for the merger. The abnormal increase in newswire coverage during negotiations is associated with an estimated savings for an average fixed exchange ratio bidder of $230 million to $558 million, or between 5 percent and 12 percent of the takeover price in an average deal, compared to floating ratio bidders.

You could feel a vague sense of unease about some of this. Like, in general, do people really know 60 days before a deal is announced that it will be a stock deal where they pay with a floating exchange ratio? Should I be at all bothered that the standard deviation of the number of articles about a company in the sample is 3x the mean? Is is possible that the timing of announcement is influenced by where stock price is, rather than the reverse (i.e. you’ve been negotiating for two months but when your stock price peaks you really motivate to sign it up quick). And, just, more broadly: really? You can make your stock price go up just by issuing more press releases? Shouldn’t that … like … shouldn’t that not work?

I dunno. But the paper sounds smart and careful and a lot of potential sins are washed out just by the gaps between those lines above: whatever you think about absolute whatevers, the relative whatevers between fixed and variable ratios strike me as compelling, and as probably explainable by some form of conscious or semi-conscious desire to put out stock-price-enhancing news when it will do you the most good.

I tend to have a pretty simplistic model of how corporate executives think about their stock price: they want it to go up! Because (1) they tend to own a lot of stock and (2) that’s kind of, like, their thing: they are measured and rewarded and praised or blamed based on their stock price so it going up is a good thing and it not going up is a bad thing. This paper I guess doesn’t exactly refute that – nobody is, like, cutting back drastically on saying nice things about their companies; even in the variable-exchange-ratio case the number of puffy press releases goes up a little bit. But it sure gives it some nuance: you push your stock up more when it gets you some actual value, in the form of cheaper acquisitions, for your company. And you optimize at least your timing, if not the total volume of nice things you say about your company, around when it most directly benefits you. (And it works. That in itself strikes me as interesting/confounding.)

Of course if you were cynical what you’d want to do is extend this result to the reverse situation: do companies strike a more dour pose when they could benefit from a low stock price? Is Warren Buffett not telling who his successor is because he’s hoping to buy back stock cheap? Do executives who are paid in stock try to talk down the stock towards the grant date, so that their dollar value gets translated into more shares?

Who Writes the News? Corporate Press Releases During Merger Negotiations [SSRN]

Do Firms Manipulate Their Stock Prices? Causal Evidence from M&A [Thing at Harvard Law school with name so long that it is impossible to describe in these link captions but it’s in my RSS because it has lots of good stuff like this, though usually, again, like 2 years after it’s on SSRN]

111 comments
(hidden for your protection)
Show all comments

111 Responses to “Potential New Way To Create Value For Shareholders: Issue More Press Releases”

  1. Guest says:

    "for, like, two years, but…"

    There, I stopped reading right there Mr. Sweet Valley High

  2. Guest says:

    I don't think you feel bad at all.

  3. Strong sell says:

    You are wearing out the word "like"
    -Mark Zuckerberg

  4. Matt's Groupie says:

    Good glaven Matt's charts excite me!

  5. Nailz6 says:

    This whole notion has made Timmy Sykes a rich man.

  6. Laxing W/Lucas says:

    Not to gasconade excessively but here at Sesquipedalian Capital Partners we have found this method of generating shareholder value to be exceptionally effective, although at times what some might term "activist" tactics are necessary to convince ferbile minded management teams to execute on it.

    -LvP

  7. Baller says:

    Come on Matt, it took two PhDs 63 pages to explain this stuff and you expect us to get it in a few paragraphs? Let me scroll a little like the good old days

  8. Billboard Man says:

    Ok, so if Bess is the reincarnation of Wodehouse, is Matt the reincarnation of the CorpFi professor who didn't get tenure?

  9. Dirk Diggler says:

    Matt,
    Any chance you can accompany me to our next neighborhood party? Bring lots of charts and white papers. You can mesmerize all the douchebag MD's, while I take their wives out back for a good shagging.

  10. piracetam says:

    This publication has inspired me to continue focusing on my own blog

  11. logo design says:

    7CZobR Major thanks for the blog.Thanks Again. Cool.

  12. 8NI3QC Thanks for sharing, this is a fantastic post.Much thanks again. Awesome.

  13. doctor says:

    I am so grateful for your blog post. Much obliged.

  14. I loved your blog.Much thanks again. Cool.

  15. Thanks a lot for the article post.Really looking forward to read more. Much obliged.

  16. Really enjoyed this blog. Want more.

  17. Thanks again for the post. Fantastic.

  18. seo agency says:

    I cannot thank you enough for the blog post.Thanks Again. Cool.

  19. Thanks for sharing, this is a fantastic article.Really looking forward to read more. Great.

  20. Fantastic blog.Thanks Again. Cool.

  21. I am so grateful for your blog article.Much thanks again. Much obliged.

  22. Smallpox says:

    Major thankies for the blog.Thanks Again.

  23. Major thankies for the blog post.Really thank you! Really Cool.

  24. Looking forward to reading more. Great post.Really thank you! Fantastic.

  25. A big thank you for your post.Really thank you! Want more.

  26. Thank you ever so for you article post.Really thank you! Really Great.

  27. I think this is a real great blog article. Fantastic.

  28. I really enjoy the article.Really thank you! Much obliged.

  29. I really like and appreciate your article post. Much obliged.

  30. Looking forward to reading more. Great blog post.Really looking forward to read more. Fantastic.

  31. Im thankful for the blog. Keep writing.

  32. Im obliged for the article post.Thanks Again. Really Cool.

  33. Major thankies for the blog.Much thanks again. Cool.

  34. Watch movies says:

    Thank you ever so for you article post. Cool.

  35. wow, awesome article post.Thanks Again. Will read on…

  36. Im obliged for the blog.Much thanks again. Great.

  37. Thanks again for the blog post. Fantastic.

  38. Major thanks for the article post.Really looking forward to read more. Cool.

  39. Thank you ever so for you article.Much thanks again. Much obliged.

  40. Katy Hardter says:

    This week I am finishing up binding on a lap quilt that’s a wedding give for any charming young pair. I just love doing bindings. It’s the finish of one project and the beginning thoughts in the next!

  41. crork says:

    tKwJVl Great blog post.Thanks Again. Fantastic.

  42. I really liked your blog post.Really thank you! Want more.

  43. I loved your blog post.Thanks Again.

  44. Major thanks for the post. Cool.

  45. I think this is a real great blog.Really thank you! Keep writing.

  46. euko koxp says:

    I appreciate you sharing this blog.Thanks Again. Keep writing.

  47. wristwatches says:

    Hey, thanks for the blog post.Thanks Again. Cool.

  48. Really enjoyed this blog post.Really thank you! Want more.

  49. jual jaket says:

    Great blog.Much thanks again. Keep writing.

  50. Submit story says:

    I appreciate you sharing this article.Really thank you! Fantastic.

  51. icp scam says:

    Im thankful for the blog.Really looking forward to read more. Really Cool.

  52. Major thanks for the blog post.Thanks Again. Much obliged.

  53. I think this is a real great blog article.Much thanks again. Keep writing.

  54. Enjoyed every bit of your blog article.Thanks Again. Fantastic.

  55. Thanks a lot for the blog article.Much thanks again. Want more.

  56. lawyer says:

    Enjoyed every bit of your blog article.Thanks Again. Cool.

  57. Major thankies for the blog.

  58. Say, you got a nice post.Really thank you! Keep writing.

  59. A big thank you for your post.Thanks Again. Much obliged.

  60. Say, you got a nice blog article. Cool.

  61. wow, awesome blog.Really looking forward to read more. Great.

  62. Im thankful for the article post.Much thanks again. Really Cool.

  63. air caraibes says:

    Im grateful for the blog.Really thank you! Will read on…

  64. Really appreciate you sharing this blog post. Really Great.

  65. Great, thanks for sharing this blog article.Really thank you! Really Cool.

  66. I value the article post.Really thank you! Awesome.

  67. Very informative blog article.Thanks Again. Really Great.

  68. Awesome blog.Really looking forward to read more. Want more.

  69. Spa NYC says:

    Thanks so much for the article.Really looking forward to read more. Cool.

  70. remain happy says:

    I appreciate you sharing this article post.Really thank you! Want more.

  71. Awesome blog.Really thank you! Awesome.

  72. Looking forward to reading more. Great blog. Fantastic.

  73. advoyant says:

    Say, you got a nice blog post.Really thank you! Cool.

  74. comercial says:

    Really informative blog. Fantastic.

  75. I really liked your blog post.Much thanks again. Cool.

  76. A big thank you for your article post. Really Great.

  77. Very good article post.Really thank you! Really Cool.

  78. attic fan says:

    Im thankful for the post. Will read on…

  79. wow, awesome post. Fantastic.

  80. Great, thanks for sharing this post. Keep writing.

  81. lipo 6 black says:

    A round of applause for your blog post.Really thank you! Keep writing.

  82. Enjoyed every bit of your article.Really looking forward to read more. Much obliged.

  83. Appreciate you sharing, great article.Much thanks again.

  84. I really enjoy the article.

  85. Muchos Gracias for your article post.Much thanks again. Fantastic.

  86. Say, you got a nice blog post.Thanks Again. Keep writing.

  87. Enjoyed every bit of your article.Thanks Again. Really Cool.

  88. Thanks for the article.Really thank you! Really Cool.

  89. cool apps says:

    Fantastic post.Really looking forward to read more. Fantastic.

  90. I am so grateful for your blog article.Much thanks again. Really Cool.

  91. Enjoyed every bit of your blog.Much thanks again. Much obliged.

  92. jewish says:

    Enjoyed every bit of your blog article.Much thanks again. Will read on…

  93. I am so grateful for your blog post.Much thanks again. Will read on…

  94. Major thanks for the blog article.Really looking forward to read more. Much obliged.

  95. PCI says:

    Im thankful for the blog article.Really looking forward to read more.

  96. Thanks so much for the blog post.Really thank you! Awesome.

  97. mac vpn says:

    I really enjoy the blog article.Really looking forward to read more. Keep writing.

  98. Looking forward to reading more. Great blog post.Thanks Again. Great.

  99. Appreciate you sharing, great article. Fantastic.

  100. tweets says:

    I cannot thank you enough for the blog post.Thanks Again. Will read on…

  101. Major thanks for the blog. Fantastic.

  102. health show says:

    This is one awesome blog.Thanks Again. Want more.

  103. I loved your blog article.Thanks Again. Great.

  104. Great, thanks for sharing this blog article.Thanks Again. Great.

  105. I loved your post.Really looking forward to read more. Cool.

  106. TEFLON says:

    Thank for your blog. It is Goood, Hope more for it. [url=http://www.PTFE-sheet.com]PTFE[/url] [url=http://www.PTFE-rod.com]PTFE[/url] [url=http://www.Teflonrod.com]PTFE[/url] [url=http://www.fluoroplastic.cn]PTFE[/url]

  107. A big thank you for your article. Want more.

  108. antiques says:

    Thanks a lot for the post. Great.

  109. Im obliged for the blog.Much thanks again. Will read on…

Our Sites

  • Above the Law
  • How Appealing
  • ATL Redline
  • Breaking Defense
  • Breaking Energy
  • Breaking Gov
  • Dealbreaker
  • Fashonista
  •