Is it illegal? As far as I understand it's the business model for Mark Cuban's sharesleuth.com (although he fully discloses that's what he does)
"We're looking for companies that were built for fraud, for executives who are enriching themselves at shareholder expense, and for businesses whose behavior runs counter to their stated objectives or to the public interest."
"In certain instances, the majority partner of Sharesleuth.com is going to make personal investments based on information we uncover. Those investments will be fully disclosed, so that readers can evaluate any potential conflicts of interest.The reporters and editors , however, will maintain policies of not holding individual securities, and we will report Sharesleuth.com stories no differently than we have others throughout our careers. "