Short Attack - Online Risk Check

What is a “short attack”?

A short attack refers to a targeted attack by short sellers on a listed company with the aim of causing the company’s share price to crash.

Short sellers bet on a drop in the share price by borrowing shares, selling them and then buying them back at a lower price. They publish negative reports about the company to push the share price down.

In addition to seeing a huge drop in share value, the victim of a short attack potentially faces massive reputational damage.

German companies are being increasingly targeted by aggressive short sellers

Short attacks have been a widespread phenomenon in the Anglo-American world for many years, but recently a number of listed companies in Germany – including DAX corporations – have also been victims of short-selling activism.

Despite this, very few companies are prepared for a short attack. As evidenced by the 2018 study on Investor Activism (published by CMS, the German Federal Association of Corporate Lawyers (BUJ) and CLI Corporate Legal Insights), only around a quarter of the listed companies included in the survey had a contingency plan in place against short sellers.

Short sellers select their targets based on specific criteria

Short sellers select their targets on the basis of certain specific criteria. They mainly try to identify companies where it will be easiest to achieve a significant fall in the stock market price.

The greater the number of relevant criteria that apply, the higher the risk of a company becoming the target of a short attack.

No company is 100% immune from becoming the target of a short attack, but the risk of short sellers launching or succeeding in an attack can nonetheless be reduced. Effective prevention of a short attack begins with analysing whether and why a company could come under attack. The second step involves preparing countermeasures against aggressive short sellers.

CMS online risk check for short attacks

The online risk check developed by CMS helps to assess the risk of your company coming under a short attack. Within a matter of minutes and with just a few clicks, you can gain an initial insight into whether and why your company could be the target of a short attack.

You can access our online risk check here. Please do not hesitate to contact us at any time if you have any questions about short selling/short attacks.