Bloomberg Markets Magazine named Mr. Block as one of the “50 Most Influential in Global Finance” in 2011. Carson Block, Muddy Waters: Intuitively a pandemic is a good thing for short sellers generally, but it turns out, maybe not. He has hit some notable home runs, including most recently with his exposure of fraudulent accounting practices at Luckin Coffee, once thought to be the “Starbucks of China.” He remains best know for the 2011 call that brought his name and that of his activist investment firm Muddy Waters Research to major prominence: Sino-Forest, a fraudulent Canadian-listed Chinese company that claimed to be the largest forest plantation owner in China.if(typeof __ez_fad_position != 'undefined'){__ez_fad_position('div-gpt-ad-brostocks_com-medrectangle-4-0')}; Carson Block is an American researcher who focuses primarily on Chinese companies due to his vast previous experience as an entrepreneur in China. His firm, Muddy Waters Research, will publish reports recommending shorts in specific companies that they have researched and now offer investors the opportunity to participate in profiting from their ideas through the Muddy Waters hedge fund (Muddy Waters Capital LLC) launched in 2016. The report ultimately went on to accuse Sino-Forest of a multi-billion dollar Ponzi scheme, covered up by institutional support and a supposedly solid management team that consistently beat quarterly earnings. Carson Block addressed the strong stock performance of GSX over the summer with multiple media outlets including Bloomberg TV. We’ll keep this article updated to provide the latest calls here.if(typeof __ez_fad_position != 'undefined'){__ez_fad_position('div-gpt-ad-brostocks_com-banner-1-0')}; This is the call that made Carson Block and Muddy Waters a household name to most Western investors. Why were Ströer shares resilient compared to other short selling targets of Muddy Waters? He faults the Federal Reserve for pumping in too much liquidity, allowing for too much credit extension and too much leverage. Block's research firm, the appositely named Muddy Waters, eventually evolved into a hedge fund with only around $225m in assets, says the FT. But if Block is right, what seemed like a history-making retail uprising last week was just as much a convenient smokescreen for internecine hedge-fund warfare. The list of casualties in that fight is growing from the severely wounded, such as Melvin Capital Management and Maplelane Capital, to include funds run by firms ranging from David Einhorn’s Greenlight Capital to Renaissance Technologies. It’s possible that some investors were less willing to fully accept an analysis of a non-Chinese company by Muddy Waters. Further accusations include that GSX is understating its expenses and corporate governance issues from its Chairman. Muddy Waters original report on Sino-Forest is still available on their web site for download here. Unfortunately for Prothena, their one hit wonder drug was indeed a dud, as Muddy Waters alleged in their report. … NQ’s largest customer by far is really NQ. The report itself used slightly less strong language in terms of accusing the company of outright fraud than in previous cases such as with Sino-Forest and NQ Mobile. Muddy Waters is short XL Fleet Corp. (NYSE: XL) because it strikes us as middle of the fairway SPAC garbage. Muddy Waters turned its attention to biotech stock Prothena (ticker: PRTA), a company developing a seemingly promising drug for a condition known as AL amyloidosis, which had no available cure. They didn’t mince words, did they?if(typeof __ez_fad_position != 'undefined'){__ez_fad_position('div-gpt-ad-brostocks_com-leader-3-0')}; NQ Mobile was an NYSE-listed Chinese mobile security company, and once a high-flier, listed in Deloitte’s Fast 50 China Program, recognizing its extraordinary growth. All information on this site and in the following post should not be construed as investment advice or a specific recommendation. Show full articles without "Continue Reading" button for {0} hours. On March 30, 2012, the company declared bankruptcy, well under a year after the original Muddy Waters report was published.if(typeof __ez_fad_position != 'undefined'){__ez_fad_position('div-gpt-ad-brostocks_com-leader-1-0')}; The accusations of fraud made in the report were ultimately confirmed by the Ontario Securities Commission (OSC) which found that Sino-Forest and four of its executives, including its CEO, Allen Chan, were active participants in a long-term fraud. His firm, Paulson & Co. was so high on Sino-Forest that it owned up to 14% of the company before Muddy Waters report, according to news reports. See below for some of his biggest past calls and newest targets. Block grew up in Summit, New Jersey, and holds a law degree from Chicago-Kent College of Law. We estimate that its China paying user base is less than 250,000, versus the six million NQ claims. Connect with friends faster than ever with the new Facebook app. Rick Wilking/Reuters This story is available exclusively to Insider subscribers. The stock had lost 80% of its value by 2016 and an unsuccessful rebrand to Link Motion Inc, which aimed to focus on smart driving technology never took off. Carson Block’s Effort To Avoid Becoming His Father A Serious Pain For Potentially Fraudulent Businesses Burford Capital would like the Muddy Waters founder’s rebellious phase to … Block's Muddy Waters picks its short targets differently, often betting against firms it believes are misleading investors, rather than just having a languishing business in secular decline. The day after the report was published, Sino-Forest shares lost nearly two-thirds of their market value, and days later Canadian authorities announced the company was under investigation. The report, published on June 2nd, 2011, noted that Sino-Forest had been engaged in fraud since its establishment of its reverse takeover (RTO) that allowed it to list on the Canadian market. “When we get tagged as establishment, you can’t be more inaccurate than that,” he said. Investors may have been more willing to quickly jump ship from the company as it was so closely associated with Neil Woodford, who was in the middle of his fall from grace as a star fund manager. The stock then began a sharp decline and has been on a continuous downtrend, but still trades markedly above its price at the time of Muddy Waters short call at around $66 per share in December 2020. Microsoft and partners may be compensated if you purchase something through recommended links in this article. Block justified his focus on the company by stating that the executive team at Ströer “had engaged in more highly questionable self-dealing than we’ve ever seen outside of a Chinese company.”. Par Beatrice Parrino Publié le 20/12/2018 à 09h00 Muddy Waters, LLC is a pioneer in on-the-ground, freely published investment research. — Carson Block, founder of Muddy Waters . Carson Block is the Chief Investment Officer of Muddy Waters Capital LLC, an activist investment firm. Insider-affiliated companies are both users and suppliers of Ströer OOH advertising locations, which we think is inappropriate; and further causes us to be concerned about whether sufficient internal controls exist. Muddy Waters downloaded GSX class data to make the analysis and further corroborated their conclusions with a former manager that worked at the company. That could be interesting.”. These are some of the most notable calls from Carson Block and his firm Muddy Waters. Go to muddywatersresearch.com”. Carson Block, Muddy Waters founder Mr Block’s reputation precedes him. As a result of that and similar situations, he had to hire a full-time trader to monitor the stock-options markets and adjust positions to more actively manage risk. “It’s a trading game, it’s flows-driven, it’s technical,” he said. Today, the shares trade higher than at the time of the report, indicating that the market didn’t fully buy into the Muddy Waters analysis. If you would you like to continue, please select “I Agree. He's been called the world's most feared short seller, causing nearly a dozen companies to be shut down or delisted. Before Muddy Waters’ research report uncovered this massive fraud, Chinese companies were still relatively attractive prospects for global investors seeking growth at a time when most Western markets were still struggling to shake off the effects of the Great Financial Crisis (GFC). Solutions 30 place en redressement judiciaire 3 de ses filiales, Telima Professional services, TPS etc. As he sees it, that effort to expose wrongdoing has a “social utility” and should set him apart from the short-sellers under attack on Reddit. Sino-Forest was an example of one such promising company, attracting investments from major investors such as John Paulson, the hedge fund manager who profited from shorting mortgage back securities during the financial crisis. “At the end of the day, it’s a fake company,” he said in the June 2020 interview. What’s not clear yet is who profited on the other side. “We need a combination of monetary and fiscal policy that makes sense or else we’re just stuck in this building a bigger powder keg to explode again,” he said. Carson Block's Muddy Waters Research announced Wednesday it has taken a short position in eHealth Inc., a digital health insurance marketplace company. The result was an enormous win for Carson Block, and a huge loss for Prothena’s main backer, Neil Woodford, a UK-based fund manager who held 8.6% of Protehna’s shares at the time of the failed trial and began a major fall from grace for one of Britain’s most notable investors. The GSX call has been a roller coaster ride for Muddy Waters and those who followed the analysis and shorted the company as a result. Looking at the stock performance of Ströer (ticker: ETR:SAX), we can see that the Muddy Waters report did have a significant impact on the share price when it was released in April 2016. You are leaving the Muddy Waters Capital (muddywaterscapital.com) website and going to the Muddy Waters Research website (muddywatersresearch.com). Entre le mercredi 9 … The bearish report accused Burford of grossly misrepresenting its return on capital, questioned its accounting and even took issue with the firm’s CFO being married to the CEO. Carson Block, the founder of Muddy Waters. The report questioned the metrics of the company’s “digital transformation” as the traditional advertiser sought to modernize its operations through numerous acquisitions focused on online advertising. Carson Block, the founder of Muddy Waters Capital, likes to talk about what a screwed up year 2020 was — on many levels. We will keep this article updated with new calls as they become available. Unlike a long/short equity fund manager like Steve Eisman, Carson Block is entirely focused on bogus companies that make for short targets. In January 2015, the firm raised an initial $100 million for its investment strategy. Woodford’s funds kept turning up more and more questionable and illiquid holdings and the added association of Burford being targeted by a short-seller with the reputation of Carson Block was likely a “sell first and ask questions later” move by many skittish investors. if(typeof __ez_fad_position != 'undefined'){__ez_fad_position('div-gpt-ad-brostocks_com-leader-2-0')}; Not long after the firm’s massive success with their Sino-Forest call, Muddy Waters initiated coverage on NQ Mobile as a “strong sell,” which understates just how negative Block & Co. was on the stock. “What constitutes coordination? “It’s almost funny if it weren’t for the fact that I now have all these people trying to troll me.”. EXCLUSIF. Within two months of the report being published Sino-Forest’s CEO resigned. Because of the way the transaction was structured, it is impossible to say how much profit the insiders made; however, we believe approximately EUR 22.5 million on a EUR 2 million cash investment made just six months earlier is a reasonable estimate. But what others short calls did Block make to get to this point? For the moment, it’s an unproven theory. Do your own research and/or consult a financial professional before investing your money.if(typeof __ez_fad_position != 'undefined'){__ez_fad_position('div-gpt-ad-brostocks_com-medrectangle-3-0')}; Carson Block is currently one of the most notable short sellers and activist investors in the eyes of the investment public. Carson Block, director of research and founding partner of Muddy Waters Research LLC, speaks during an interview in New York, in this October 16, 2014 file photo. Paulson & Co. would eventually dump their entire position in the wake of Muddy Waters report that compared Sino-Forest to a fraud on the level of Bernie Madoff. “I’ve wondered, is there coordination with these hedge funds?” Block said in an interview on Bloomberg Television. Block said his firm, Muddy Waters Capital, was the victim of what he thinks was a short squeeze by hedge funds in shares of GSX Techedu Inc. in the weeks leading up to … However, unlike many other of Muddy Waters’ targets, Ströer was able to shake off the negative report and the shares rebounded beginning in 2017. Publié le 14 décembre 2020 par Magazine En-Contact Email Facebook LinkedIn Twitter Whatsapp. Block said his firm, Muddy Waters Capital, was the victim of what he thinks was a short squeeze by hedge funds in shares of GSX Techedu Inc. in the weeks leading up to the GameStop frenzy. If he were such an insider, he asked, why would Goldman Sachs Group Inc. and Credit Suisse Group AG have turned down his business? For more information on the ongoing Luckin Coffee situation, visit our article on the topic. The founder of San Francisco-based Muddy Waters, who made his name shorting Chinese stocks, told MarketWatch in a … The potential for a proven therapy would be a major success for the company and one that its entire enterprise value was tied up in. Did they cross the line? — Carson Block, Muddy Waters LLC founder . Finally, it’s possible that much of what the research picked up on was basic sloppiness in accounting but not a conspiracy to mislead investors. Prothena, while still trading today, is a shell of its former self, with its shares trading at a fraction of previous highs in 2017. Muddy Waters was founded by Carson Block, an American short-seller. (Bloomberg) -- Carson Block, the activist short-seller famous for targeting Chinese frauds, recognizes familiar behavior in the rally of shares such as GameStop Corp. To him, the parabolic moves look less like the product of Reddit-driven retail orders than a short squeeze by hedge funds targeting other hedge funds. We use cookies to ensure that we give you the best experience on our website. In fact, the Prothena episode was just a prelude for more drama related to Muddy Waters, as the short-seller next targeted Burford Capital, Woodford’s second largest holding in his fund portfolio. At least 72% of NQ’s purported 2012 China security revenue is fictitious. Carson Block made major headlines earlier this year for promoting an anonymous report that correctly assessed that Luckin Coffee executives were cooking the books as it related to sales and revenue numbers. Muddy Waters conducts extensive due diligence based investment research on companies around the globe. Calling the company a “near total fraud,” the main basis of the short thesis is that GSX is allegedly faking up to 80% of its customers through the use of bots. “We’re going to do what we need to do to survive.”, Read more: Carson Block Cuts Short Bets, Ducking Online ‘Mob’ Hunting Bears. He typically publishes the research underpinning his short thesis and makes it available on Twitter. The bad publicity from being targeted by Muddy Waters had an immediate and predictable impact on Burford’s share price, which dropped 65% in the 24 hours after the bearish report was published. NQ is a massive fraud. The bearish thesis on Ströer went beyond questionable acquisitions and to the heart of the company’s digital strategy, which investors had previously bought into and rewarded with an increasing share price. Or if you wish to remain on the Muddy Waters Capital website, please select “No Thanks.” Also on Wednesday, Mr. Block addressed the collapse of hedge-fund-like family office Archegos Capital Management. He previously operated a self-storage company there and even wrote the book on “Doing Business in China for Dummies.”. Unlike many short-sellers, Block is decidedly public with the names of companies he believes are scams and which he’s betting against. Muddy Waters strayed from their focus on China stock frauds when they highlighted their short position in Ströer, a German out-of-home (OOH) advertising company that focused on physical display advertising. We conclude that the real green technology at XL is duping investors into throwing money at this company through a collection of exaggerations, half-truths, … Carson Block: meet the man who took down UAE's NMC Health. He scoffs at the suggestion that he’s part of a Wall Street establishment. BroStocks is a financial entertainment and education web site. Muddy Waters initiated a short position on the Chinese K-12 after-school tutoring service GSX Techedu (ticker: GSX) in May of 2020. Muddy Waters’ criticism of the Ireland-domiciled Prothena was multifold: it questioned not only the efficacy of its main drug for treating AL amyloidosis, NEOD001, and allowed that even if it was wrong, the pricing model for such a niche drug would not allow the company to hit its best-case sales targets that Wall Street seemed to be pricing in. Pourquoi l'action Solutions 30 a dévissé de plus de 50 % depuis le 9 décembre ? The shares, which had gained 280% in the year leading up to the report, promptly loss 50% of their value in the wake of the report. “It always transfers wealth from the many to the few.”, For more articles like this, please visit us at bloomberg.com, Like us on Facebook to see similar stories, VA hospital serial killer sentenced to life in prison, Andrew Brown Jr.'s family to view body camera footage of his fatal shooting. Burford Capital, a UK-based specialist in litigation finance, which funds lawsuits and then takes a percentage of any subsequent settlements, came under fire from Muddy Waters on a number of fronts. Carson Block, Muddy Waters . The legacy of this fraud established Muddy Waters’ reputation as a top short-selling firm and also shattered the illusion of many investors who had hoped Chinese small-cap companies would be the “next big thing.” Investors and regulators became more aware of a major problem regarding RTO fraud, where Chinese companies would use Western corporate shells in an attempt to obscure their true operations from auditors and the investing public. If you continue to use this site we will assume that you are happy with it. But Block, 34, seems to have hit his stride with Muddy Waters Research, an online service he launched in June 2010 to expose what he describes as misstatements and fraud at … Muddy Water founder/CEO Carson Block said he's still short Chinese tutoring company GSX Techedu (NYSE:GSX), which he calls a "near total fraud," though his … Carson Block, founding partner of Muddy Waters Research LLC, speaks on a panel discussion at the annual Skybridge Alternatives Conference (SALT) in Las Vegas May 10, 2013. Together they go back over the past year of short-selling and do an around the horn take on all of the biggest stories.
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