CEOs who come under attack by activist short sellers often don’t know what hit them.
The guiltiest among them often lash out with personal attacks against their critics. In this case, Aurelius Value, an anonymous activist short seller known for its research on banks and other financial-sector firms, posted a scathing report on Washington D.C.-based Eagle Bancorp Inc. (EGBN) on Dec. 1 alleging bad loans, kickbacks to management and lack of internal controls. That dropped the stock by over 24% on the day of the report even though financial companies are typically hard for short sellers to get right. (See AIG, Lehman etc.)
Shares of EGBN have recovered somewhat but that didn’t stop the name calling by CEO Ronald Paul (not Ron Paul) and COO Michael Flynn (not the indicted Michael Flynn.)
“These are shrewd scumbags,” Paul told S&P Global Market Intelligence. Flynn called Aurelius “short-sale bandits” in the same article. Here’s how they are planning to combat the allegations.
From S&P Global Market Intelligence:
In the interview, Paul said Eagle is consulting with Wall Street experts and has hired a lawyer with special expertise in U.S. Securities and Exchange Commission matters to provide a playbook for the bank as it anticipates further attacks from Aurelius. Paul said that, “as hurt as I am” by the Aurelius allegations, Eagle does not plan litigation against the short seller. “That’s just not our style,” he said, but the bank does intend to be fully prepared to refute further allegations that it determines to be false.