Firm Visibility and Acquisition Likelihood: Evidence from Seeking Alpha Coverage

Abstract

This study investigates whether social media coverage influences a firm’s likelihood of being acquired. Specifically, we hypothesize that coverage on the Seeking Alpha platform reduces search frictions for low-visibility firms by drawing attention from potential acquirers and M&A advisers (i.e., investment banks), increasing the likelihood of acquisition. Employing a novel setting in which Seeking Alpha contributors were incentivized to write articles about small firms, which historically had received relatively little coverage, we find evidence consistent with our prediction. Moreover, the increased coverage leads to deals between acquirers and targets that are (1) more geographically distant from each other, and (2) less likely to be in the same industry, consistent with a firm visibility channel. We validate our inference by showing such coverage leads to increased financial statement downloads by potential acquirers and investment banks. Overall, our findings point to social media serving an important role in reducing search frictions in the market for corporate control by enhancing managers’ awareness of potential investment opportunities.

Keywords: Firm visibility, mergers and acquisitions, Seeking Alpha, social media

JEL Classification: D83, G34, M15, M41