Social media have proved to be powerful tools for a wide range of constituencies, including revolutionaries in the Middle East and corporations in the Midwest. But hedge funds and other investors have yet to really embrace sites such as Twitter and Facebook as they rally support for their causes.
That could change soon.
Activist investors are testing online technologies to reach out to small shareholders, find potential allies, and coordinate proxy votes.
Although it remains to be seen whether such efforts will ever reach a critical mass, Wall Street notables are starting to pay attention. At an industry conference in Berlin last month, David Rubenstein, a co-founder of the private equity giant Carlyle Group, predicted shareholder activism would move to the Web.
"Let's suppose somebody wants to buy a company and has to get shareholder approval," he said. "Employees and shareholders could use Facebook to rally support against an acquisition."
The Internet is a natural vehicle for investors. In the early days of the dot-com boom, individuals and day traders used message boards to exchange stock tips.
In a way, it was a forerunner of today's social media efforts. Although sites such as the Motley Fool still exist, they remain mainly a forum for sharing investment ideas rather than a gathering place for activists.
Eric Jackson, a private investor, posted videos on YouTube in 2007 and set up a blog to detail what he considered flaws in Yahoo Inc.'s business strategy.
He soon got the attention of the Internet company's small shareholders, a group that collectively held some 2.6 million shares. With that base, he took his concerns to larger institutions, mobilizing an effort that helped bring down Yahoo's chief executive, Terry Semel.
"You need to make a case that is going to resonate with large shareholders," Mr. Jackson said. Otherwise "it becomes nothing more than a group of people from Yahoo Finance complaining about the company."
Today, more established players are turning to the Web, even if their activity remains on the fringe.
Carl Icahn set up a scathing Web site to drum up support in his proxy battle against movie studio Lionsgate.
The site detailed how shareholders could help "save" the studio by approving his deal, which eventually failed. Elliott Advisors is taking to the Web to urge small investors of the Swiss biotech company Actelion Pharmaceuticals Lts. to register their shares to vote and support Mr. Elliott's slate of directors.
Academics and industry experts see a growing place for the Internet and social media in activists' arsenals, much as companies rely on Twitter or Facebook to get feedback or test new ideas.
"It has the potential to move groups of shareholders from passive administrators to active participants," said Marcus Birkenkrahe, a professor of business information technology at the Berlin School of Economics and Law. "The financial industry in particular ought to be wary of social media as a means of creating assemblies where people learn to articulate, sell, and distribute their adverse views."
A number of online firms are popping up to help facilitate the process. One, moxyvote.com, a two-year-old site that estimates it has thousands of users, is trying to make it easier for small investors to vote their shares. "Moxy Vote was designed to get the little guys together," said co-founder Mark Schlegel. "We're a proxy adviser for the individual."
Investors at Moxy Vote can vote on corporate issues independently or as part of a broader group. For example, As You Sow, a nonprofit organization focused on environmental and human rights issues, is using the site to get shareholders to vote in favor of its resolution calling for a study at Coca-Cola Co. about certain chemicals' effects on its aluminum cans. The beverage maker is set to vote on the issue at its annual meeting this month.
"It's just like writing a letter to your congressman," said Andrew Behar, chief executive of As You Sow.
Moxy Vote claims at least one big success. Small shareholders in On2 Technologies, a technology developer, banded together on the site to block a takeover bid by Google Inc. Collectively, the group of investors held roughly 20 million shares, or about 11 percent of the outstanding shares. They cast a no vote, helping to spur Google to sweeten its offer by nearly 25 percent to roughly $133 million. Google acquired On2 last year.
Still, Internet activism isn't without its critics. Some assert that short-sellers and others can hide behind the Web to inflict unwarranted harm on a company's stock price.
That's what the chief executive of China MediaExpress Holdings claimed after research firms, including Muddy Waters -- an upstart research outfit that also makes bets against stocks -- published a report online in February that questioned the company's accounting.
The report was discussed on Twitter, and Muddy Waters Research posted videos about the company on YouTube. Shares of China MediaExpress dropped more than 33 percent the day the report was published.
"The manner in which the short-sellers seem to have timed and coordinated their efforts plays into their ultimate strategy," the chief executive of China MediaExpress wrote in a letter to shareholders on Feb. 7.
In mid-March, the chief financial officer of China MediaExpress resigned. And the independent auditor, Deloitte Touche Tohmatsu, said an investigation would be necessary to find out whether prior financial statements were reliable.
Despite such controversy, experts say the emergence of social media and other online grass-roots efforts is a development that cannot be ignored.
"If I was a senior executive in a major corporation, I would have this on my radar screen of things to keep an eye on," said Andrew Stephen, a professor of social media strategy at Insead, a business school in Paris.