Who is Robert Chapman: Hedge Fund Maverick Has Bizarre Letters Profiled in the New Yorker

Bob Chapman is most infamous in relation to something called a 13D filing. The 13-D filing is a requirement that curbs the tradition "attack mode" maneuver that allows a stock picker to buy into a company. The 13D filing takes away the 'stealth mode" capability of a large fund manager trying to muscle their way into a company using suddenly acquired shares. This kind of market play has been dramatized in movies such as "Wall Street". Some companies will pay a upfront amount just to get such prospective "players" out of their company outright.

Using stock traders, wealthy individuals, corporate fund directors or managers, or those in charge of a large mutual fund of accumulated investment money, can buy up company stock. This business investment type has a high degree of risk. Over time, the SEC has required rules for this type of scenario. But well-helled attack dogs like Chapman still make the play. But they can't be too sneaky. If they acquire a certain percentage, the acquirers have to file a 13D report to the company. This can avoid ugly surprises in the boardroom.

The SEC requires this so companies and their Boards can know when their company is in play. Wall Street has long published the tombstones of fractious deals, takeovers, and cashouts incurred by a 13D notice. The 13-D filing is the notification to the company that someone has bought a significant enough portion of the stock to be considered a prime shareholder. This is usually not good news for company directors. It means someone with money and power has just stepped inside their personal sandbox.

Usually following the 13D filing, companies will have to take notice formally of an individual or named representative of certain investors in large stake holdings. A lot of money can be made if the share price can be made to rise or fall quickly. If the new stockholder has ideas and intentions about how the company should be run, the 13d filing can be seen as a notice for "war". Usually this process takes time. The Directors or managers of a company have some time after the 13D notice to build a strategy or circle their managerial wagons.

But Chapman leveraged a loophole in the language of the law to use this process for his own purposes. So far no governing body has ruled it illegal. Chapman has remade the 13D in his image, using the notification of stock acquisition as an opening salvo to inner target company pre- management. This means the legal channels are now open to leverage challenges to managerial stability and directorship right away, before unaware companies even know what's afoot. This is seen on Wall Street as a brilliant play in the game of high finance.