Title: Wolves at the Door
Description: Some commentators attribute the success of certain hedge fund activism events to “wolf pack” activism, the support offered by other investors, many of whom are thought to accumulate stakes in the target firms before the activists’ campaigns are publicly disclosed. This paper investigates wolf-pack activism by considering the following questions: Is there any evidence of wolf-pack formation? Is the wolf pack formed intentionally (by the lead activist) or does it result from independent activity by other investors? Does the presence of a wolf pack improve the activist’s ability to achieve its stated objectives? First, I find that investors other than the lead activist do in fact accumulate significant share-holdings before public disclosure of activists’ campaigns, a result consistent with wolf-pack formation. Second, these share accumulations are more likely to be mustered by the lead activist rather than occurring spontaneously. Notably, for example, the other investors are more likely to be those who had a prior trading relationship with the lead activist.

Third, the presence of a wolf pack is associated with a greater likelihood that the activist will achieve its stated objectives (e.g., will obtain board seats) and higher future stock returns over the duration of the campaign.