Hedge Funds and Traders Scrutinize Flight Data From Corporate Jets. Here Is Why.
1 in 5 merger operations could have been anticipated in recent years thanks to this type of complementary data.
The use of private jets has made a lot of noise in recent weeks for ecological reasons. Environmental activists are spending time monitoring the various flights of billionaires and other big business leaders. Then, they point out the ecological disaster that this represents at a time when everyone is called to fight against climate change by changing their lifestyle habits.
Indeed, it is illogical that the ultra-rich should not be put to contribute as well at a time when the fight against climate change has become a global priority.
In addition to environmental activists, you should also know that hedge funds and traders are particularly interested in what is happening in the sky. They too keep a close eye on the jets of the chairmen of large listed companies.
The reason behind this interest? They rely on the adage, “Tell me where you'll land and I'll tell you who you'll buy.”
Repeated trips to a city or town may suggest that the company will make a buyout or alliance there. This is especially true when a company-owned jet lands in Omaha, the historic headquarters of Berkshire Hathaway, Warren Buffett's group known for its many acquisitions.
On April 29, 2019, a stock market and financial analysis firm, Gordon Haskett Research Advisors, had thus revealed to its clients that a jet from Occidental Petroleum had landed at the airport of this Nebraska city. Two days later, Warren Buffett invested 10 billion dollars in the oil group, which wanted an ally to help it buy Anadarko.
A trigger
The study “The real first class ? Inferring confidential corporate mergers and government relations from air traffic communication” shows that out of a sample of 36 merger transactions, seven, or one in five, could have been anticipated by observing the repeated paths of the “predator's” jets towards its “prey”. For five takeovers, the buyer landed its aircraft between two and twelve times at an airport near its target's headquarters in the month before the takeover.
The study of CEO travel is not an infallible indicator. However, it can be a trigger for an analyst or manager who knows the company and its plans well. CEO flight tracking gained popularity “in 2017 when it helped hedge funds predict Johnson & Johnson's $30 billion buyout of Actelion,” recalls Reuters.
Knowing they are being watched, CEOs may hold their “sensitive” meetings in neutral locations (major capitals) to avoid “leaks.” Since the Covid crisis, virtual Zoom meetings have multiplied.
Private jet data is an example of alternative data, these new sources of complementary information (satellites, social networks, cell phone user data) that are exploited by managers, Wall Street firms, and hedge funds. They are willing to pay hundreds of thousands of dollars for data that their competitors will not have.
Elon Musk is under intense scrutiny
Hedge funds and traders don't need to bribe air traffic controllers or airport employees to be informed before others about the movements of an “interesting” passenger.
The routes are accessible thanks to Automatic Dependent Surveillance-Broadcast technology, which must be installed on aircraft flying over the United States and Europe. It gives their position, their identification, and their destination ... This information is accessible and public, to the great displeasure of CEOs who point out the danger to their safety (attack, kidnapping ...).
On Twitter, the @ElonJet account (nearly 500,000 followers) follows Elon Musk's travels, to his great regret. Some companies also offer their customers refined, more precise, and paying data on the routes of the fleets of listed companies. It can be worth the effort. Last year, mergers and acquisitions reached a record $5.815 billion.
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