Industry meta-study: 24 firms that sued short sellers (2018-2025)
Firms that sue activist short sellers underperform the S&P 500 by 72% long-term — the lawsuit is a bluffing signal that confirms, rather than refutes, the short thesis.
Thesis
Grizzly Research updates Brendel & Ryans (2021) with 1,100 activist short publications covering 906 target firms from January 2018 through August 2025. Of those targets, only 24 firms (2.6%) filed defamation, libel or securities-fraud lawsuits against the publisher — and in every single one of those 24 cases, the stock failed to recover against the S&P 500. Suing firms averaged -72.0% relative and -54.4% absolute returns, with 21 of 24 underperforming the index by more than 30%, 12 by more than 80%, and five delisted or bankrupt. Firms that did not sue performed far better (-29.4% versus the index, +15.8% absolute). Even excluding the publication-to-filing window, post-filing returns still trail the index by 66%. The authors conclude that defamation suits function as a bluffing strategy to signal false confidence, and investors should treat a lawsuit filing as a strong negative signal.
SCQA
Activist short sellers publish fraud or overvaluation reports on listed firms; target companies respond through denial, additional disclosure, internal investigation, or lawsuit — but only about 6% of targets ever litigate.
Prior academic work suggests litigation functions as a bluffing strategy to signal confidence despite real issues, but post-2018 data covering the recent surge in activist short campaigns was missing.
Investors should treat the filing of a defamation or libel lawsuit against a short seller as a strong standalone negative signal and underweight or avoid the suing company's stock.
The statistically expected outcome for a suing firm is an ~80% valuation decline against the S&P 500 over six years; the 2018-2025 sample averaged -72% relative and -54.4% absolute returns.
The three reasons
- 1
All 24 firms that sued short sellers failed to recover against the S&P 500 (2018-2025)
- 2
Suing firms averaged -72.0% relative and -54.4% absolute returns long-term
- 3
Only 2.6% of targets sue, and half of pre-2018 suing firms were later delisted
Primary demands
- Treat a defamation lawsuit filing against a short seller as a strong negative stock-price signal
- Use the lawsuit event as an indicator that the underlying allegations likely have merit
KPIs cited
Pattern membership
Precedents cited
- Brendel & Ryans (2021), Journal of Accounting Research 59(2): 487-528
- Dechow et al. (2011)
- Blackburne et al. (2020)
Composition what's on the 6 slides
Slide gallery ·
Notes
Meta-study / academic-style research note by Grizzly Research, not an attack on a single company. Updates Brendel & Ryans (2021) with 1,100 short-activist publications 2018-2025, analyzing the 24 target firms that sued the publisher. target_company field is a descriptor of the 24-firm sample rather than a single issuer. Document is text-dominant (Calibri body, two basic Excel scatter plots, two summary tables) with only Grizzly bear logo as branding. Campaign_phase set to follow_up because this extends prior academic work on the same bluffing-strategy hypothesis; it is not itself a campaign against any issuer.