Short seller Citron Research dropped a "bomb" on Valeant, a pharmaceutical company, the report can be found here.
Interestingly, well known hedge fund manager Bill Ackman is "long" the stock. Ackman himself is short Herbalife.
Bronte Capital wrote "Some comments on the Valeant conference call".
Bloomberg reports: "Ackman Feeling Shortseller's Sting as Citron Sinks Valeant Stock", a snippet:
Ackman, the billionaire hedge fund manager, has long maintained that Herbalife Ltd. is a house of cards -- a suggestion that’s drawn howls from the company. Now another Wall Street scold, Citron Research’s Andrew Left, says one of Ackman’s picks looks like the Enron Corp. of Big Pharma -- a claim the company, Valeant Pharmaceuticals International Inc., rebutted Wednesday.
Yet as Valeant’s share price plunged anew, Ackman was, in effect, getting a small taste of his own medicine. Left, a small-time short seller, had grabbed headlines and captivated Wall Street, much as Ackman has done with his campaign against Herbalife. While this dust-up might seem lopsided -- Ackman runs a prominent hedge fund, Left a relatively obscure investment and research shop -- it nonetheless underscored how vocal short-sellers can gain attention and turn markets against companies fast.
“If there’s one person in the world I don’t feel bad for, it’s Bill Ackman,” Left, a 45-year-old Florida native based in Los Angeles, said in a telephone interview. “If I could switch bank accounts and hair with him, I’d close out tomorrow. Ackman’s a hedge fund manager who goes short and goes long and sometimes you win, sometimes you lose.”
Assuming there’s been no change in its holdings since the end of the second quarter, Ackman’s Pershing Square Capital Management has lost about $2.8 billion on Valeant as it declined 55 percent from an intraday peak of $263.81 on Aug. 6, according to data compiled by Bloomberg.
“In this business, nothing is personal,” Left said. “He goes home and sees his kids, I go home and see mine, and he does what he believes with his opinion.”
Biggest Selloff
If people had never heard of Citron Research before, they have now. Just after 10 a.m. Wednesday, the firm published a note suggesting Valeant was inflating its sales, igniting the biggest selloff anyone had ever seen in the stock. Laval, Quebec-based Valeant plunged as much as 40 percent, prompting a public response from the company and creating billions of dollars of losses for its hedge fund owners.
In a statement, Valeant said Citron’s research is “erroneous” and that the company derives no sales benefit from inventory held at specialty pharmacies mentioned in the report. It suggested Citron had reached inaccurate conclusions, misconstruing links between them that are explained by logistics and support agreements.
Past foes of Ackman saw irony that a company he’s invested in was sent reeling by a short-seller claiming that its revenue is overstated. Citron, the decade-old stock-commentary site originally founded as Stocklemon.com, said Valeant is using a specialty pharmacy called Philidor RX Services to store inventory and record those transactions as sales. “Is this Enron part deux?” the report said.
Just last week Muddy Waters wrote a scathing report about TeliaSonera, a Swedish telco involved in corruption which is, according to Muddy Waters, much larger than reported so far.
Showing posts with label Citron Research. Show all posts
Showing posts with label Citron Research. Show all posts
Thursday, 22 October 2015
Tuesday, 23 December 2014
Hong Kong SFC takes action against short seller Citron
From the Financial Times, some snippets:
Citron Research has become the first shortseller to face action from Hong Kong’s watchdog, which alleges the California-based group knowingly made “false and misleading” claims about Evergrande, the Chinese developer.
Hong Kong’s Securities and Futures Commission on Monday started market misconduct tribunal proceedings against Andrew Left, the head of Citron, for claims made in June 2012 that Evergrande was insolvent and had consistently presented false information.
Shortsellers aim to profit from price falls by borrowing shares they do not own in the expectation that they will be able to buy them back more cheaply. Mr Left made HK$1.7m ($219,251) in profit from selling short 4.1m Evergrande shares before he made his claims, the SFC said.
Mr Left declined to comment.
The Hong Kong action comes as shortsellers fall under increasing scrutiny from Asia’s regulators, who have variously probed the veracity of their claims and their methods. This year, Taiwanese regulators pursued Glaucus Research, another California-based shortseller, while India’s watchdog temporarily banned a small Hong Kong hedge fund for what it said was insider trading.
In June 2012 Evergrande plunged as much as 20 per cent on the day Citron released a 57-page report on the group, which is one of China’s largest developers and a household name for its ownership of the Guangzhou Evergrande Football Club.
Evergrande, which is listed in Hong Kong, had a market capitalisation of about $8.6bn when Citron’s report was published online. It closed the day worth $7.6bn.
Citron is one of the better known of a group of China-focused short-sellers that emerged about five years ago and whose biggest scalp came in 2011 with the collapse of Sino-Forest, a $4bn forestry group, after Muddy Waters, another shortseller, questioned its veracity.
But shortsellers have enjoyed patchier success in recent years as companies have fought back and regulators stepped up their scrutiny. Evergrande was one of the first to issue a robust defence, blasting Citron’s claims and using the sort of colourful language employed by the shorts themselves.
David Webb commented on his website:
"This should be interesting. The SFC will need to show that Andrew Left either knew that his allegations were false or was reckless or negligent as to whether they were, in which case Section 277 of the SFO bites."
Citron Research has become the first shortseller to face action from Hong Kong’s watchdog, which alleges the California-based group knowingly made “false and misleading” claims about Evergrande, the Chinese developer.
Hong Kong’s Securities and Futures Commission on Monday started market misconduct tribunal proceedings against Andrew Left, the head of Citron, for claims made in June 2012 that Evergrande was insolvent and had consistently presented false information.
Shortsellers aim to profit from price falls by borrowing shares they do not own in the expectation that they will be able to buy them back more cheaply. Mr Left made HK$1.7m ($219,251) in profit from selling short 4.1m Evergrande shares before he made his claims, the SFC said.
Mr Left declined to comment.
The Hong Kong action comes as shortsellers fall under increasing scrutiny from Asia’s regulators, who have variously probed the veracity of their claims and their methods. This year, Taiwanese regulators pursued Glaucus Research, another California-based shortseller, while India’s watchdog temporarily banned a small Hong Kong hedge fund for what it said was insider trading.
In June 2012 Evergrande plunged as much as 20 per cent on the day Citron released a 57-page report on the group, which is one of China’s largest developers and a household name for its ownership of the Guangzhou Evergrande Football Club.
Evergrande, which is listed in Hong Kong, had a market capitalisation of about $8.6bn when Citron’s report was published online. It closed the day worth $7.6bn.
Citron is one of the better known of a group of China-focused short-sellers that emerged about five years ago and whose biggest scalp came in 2011 with the collapse of Sino-Forest, a $4bn forestry group, after Muddy Waters, another shortseller, questioned its veracity.
But shortsellers have enjoyed patchier success in recent years as companies have fought back and regulators stepped up their scrutiny. Evergrande was one of the first to issue a robust defence, blasting Citron’s claims and using the sort of colourful language employed by the shorts themselves.
David Webb commented on his website:
"This should be interesting. The SFC will need to show that Andrew Left either knew that his allegations were false or was reckless or negligent as to whether they were, in which case Section 277 of the SFO bites."
Thursday, 30 August 2012
Kai-Fu Lee Rips into “Ignorance and Deception” of Short Sellers Citron (updated)
Update: the parties continue to fight, a new article at TechInAsia can be found here.
I like websites that expose corporate misdeeds, but there is one group of websites that are rather suspect, for the simple reason that they make money from this. These are the websites linked to short sellers. First they analyse a potential short selling candidate (in this case often Nasdaq listed Chinese companies), if they do find wrong doings they will first take a "short" position and only then expose their findings.
Selling "short" means they sell shares that they don't have, if the share does indeed go down they then buy back the shares at a cheaper price, closing the short position and their profitable trade.
Citron Research is one of those companies, they did have some success in the past, but they might have made some mistakes in recent cases. TechInAsia, a Singapore based website reporting about regional tech stories, reports:
"One of China’s top tech luminaries, Kai-Fu Lee, has ripped into the short sellers Citron Research – branding their methodology “despicable” – after Citron released a new report about the Chinese web portal Sohu (NASDAQ:SOHU) and its Sogou search engine. Mr Lee, the former president of Google China and now the CEO of incubator Innovation Works, condemns the repeated short-selling of US-listed China stocks as “already questionable” before then pointing out the many factual errors – the “ignorance and deception;” the “holes and lies” – in the latest Citron post.
Kai-Fu Lee, in his first post on XueQiu, singles out “how these short sellers take advantage of the information asymmetry between China and the US,” making false likenesses and providing other bits of vague information that it can be tough for US investors to research and verify. His post is written in English, not Chinese, and is presumably aimed at such overseas investors."
I recommend readers to read the whole article on TechInAsia, and the original by Ka--Fu Lee which can be found here.
Unfortunately, this does not mean that Chinese companies listed on the Nasdaq suddenly do not have any (accounting or other) issues. But it does mean that not any report can be trusted at face value and readers have to do their own research.
Buyer beware, as usual.
I like websites that expose corporate misdeeds, but there is one group of websites that are rather suspect, for the simple reason that they make money from this. These are the websites linked to short sellers. First they analyse a potential short selling candidate (in this case often Nasdaq listed Chinese companies), if they do find wrong doings they will first take a "short" position and only then expose their findings.
Selling "short" means they sell shares that they don't have, if the share does indeed go down they then buy back the shares at a cheaper price, closing the short position and their profitable trade.
Citron Research is one of those companies, they did have some success in the past, but they might have made some mistakes in recent cases. TechInAsia, a Singapore based website reporting about regional tech stories, reports:
"One of China’s top tech luminaries, Kai-Fu Lee, has ripped into the short sellers Citron Research – branding their methodology “despicable” – after Citron released a new report about the Chinese web portal Sohu (NASDAQ:SOHU) and its Sogou search engine. Mr Lee, the former president of Google China and now the CEO of incubator Innovation Works, condemns the repeated short-selling of US-listed China stocks as “already questionable” before then pointing out the many factual errors – the “ignorance and deception;” the “holes and lies” – in the latest Citron post.
Kai-Fu Lee, in his first post on XueQiu, singles out “how these short sellers take advantage of the information asymmetry between China and the US,” making false likenesses and providing other bits of vague information that it can be tough for US investors to research and verify. His post is written in English, not Chinese, and is presumably aimed at such overseas investors."
I recommend readers to read the whole article on TechInAsia, and the original by Ka--Fu Lee which can be found here.
Unfortunately, this does not mean that Chinese companies listed on the Nasdaq suddenly do not have any (accounting or other) issues. But it does mean that not any report can be trusted at face value and readers have to do their own research.
Buyer beware, as usual.
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