Muddy Waters initiated a short position on the Chinese K-12 after-school tutoring service GSX Techedu (ticker: GSX) in May of 2020. Now, Muddy Waters' Carson Block is digging into UAE-based healthcare operator NMC Health, with his first damning report wiping nearly $2 billion off its market value. 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. Carson Block addressed the strong stock performance of GSX over the summer with multiple media outlets including Bloomberg TV. Like most of Muddy Waters’ short targets, Burford Capital’s stock has paid the price, today trading on the London Stock Exchange (LSE) at roughly one third of where it was before the report was issued last year. … “It’s a trading game, it’s flows-driven, it’s technical,” he said. Carson Block, Muddy Waters: Intuitively a pandemic is a good thing for short sellers generally, but it turns out, maybe not. 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. 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. 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. “At the end of the day, it’s a fake company,” he said in the June 2020 interview. Why were Ströer shares resilient compared to other short selling targets of Muddy Waters? 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. We believe it is a “Zero”. 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. 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. Entre le mercredi 9 … Muddy Waters conducts extensive due diligence based investment research on companies around the globe. Wall Street seemed to expect a positive outcome for Prothena’s drug results and as a result, the company’s shares traded as high as $67 per share in the weeks leading up to Muddy Waters report casting doubt on its main drug. Our research estimates that NQ’s real market share in China is only about 1.5%, versus the approximately 55% it reports. “What constitutes coordination? Together they go back over the past year of short-selling and do an around the horn take on all of the biggest stories. Show full articles without "Continue Reading" button for {0} hours. Microsoft and partners may be compensated if you purchase something through recommended links in this article. Muddy Waters downloaded GSX class data to make the analysis and further corroborated their conclusions with a former manager that worked at the company. 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). We pride ourselves on assessing a company’s true worth, and being able to see through the opacity and hype that some managements create. Publié le 14 décembre 2020 par Magazine En-Contact Email Facebook LinkedIn Twitter Whatsapp. Carson Block, the founder of Muddy Waters. At least 72% of NQ’s purported 2012 China security revenue is fictitious. 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. Further accusations include that GSX is understating its expenses and corporate governance issues from its Chairman. BroStocks is a financial entertainment and education web site. We will keep this article updated with new calls as they become available. 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. Go to muddywatersresearch.com”. 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, … He faults the Federal Reserve for pumping in too much liquidity, allowing for too much credit extension and too much leverage. — Carson Block, founder of Muddy Waters . 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. 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. 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. 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. 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. These are some of the most notable calls from Carson Block and his firm Muddy Waters. He scoffs at the suggestion that he’s part of a Wall Street establishment. The founder of San Francisco-based Muddy Waters, who made his name shorting Chinese stocks, told MarketWatch in a … “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. But the extraordinary growth that made NQ a hot commodity from China to Wall Street was allegedly fabricated, with Muddy Waters claiming that NQ’s market share in China was closer to 1% than the 55% the latter claimed. 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 … 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. We use cookies to ensure that we give you the best experience on our website. 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. 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. We are not licensed financial professionals. “We’re going to do what we need to do to survive.”, Read more: Carson Block Cuts Short Bets, Ducking Online ‘Mob’ Hunting Bears. 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. If you would you like to continue, please select “I Agree. Carson Block: meet the man who took down UAE's NMC Health. Muddy Waters was founded by Carson Block, an American short-seller. Carson Block's Muddy Waters Research announced Wednesday it has taken a short position in eHealth Inc., a digital health insurance marketplace company. Unlike many short-sellers, Block is decidedly public with the names of companies he believes are scams and which he’s betting against. Carson Block & Freddy Brick of Muddy Waters Research are joined by Dan David of Wolfpack research in this first episode of The Short of it. Solutions 30 : et si Carson Block, le patron de Muddy Waters Research, avait le nez creux ? In April 2018 Prothena’s shares plunged 70% in a classic biotech crash, as NEOD001 failed a crucial clinical trial. That could be interesting.”. Muddy Waters accused the German firm of drastically overstating its digital revenues and growth rates and pointed out numerous issues with their accounting standards, which the researchers indicated was either “the result of incompetence or an attempt to mislead investors.”. Muddy Waters alleged that Sino-Forest’s convoluted corporate structure allowed it to obscure its operations from auditors, while at the same time massively overstating the size of its assets, in one case overstating the value of its timber investments in Yunan Province by $900 million. Block's research firm, the appositely named Muddy Waters, eventually evolved into a hedge fund with only around $225m in assets, says the FT. “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. EXCLUSIF. Solutions 30 place en redressement judiciaire 3 de ses filiales, Telima Professional services, TPS etc. 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. “It’s almost funny if it weren’t for the fact that I now have all these people trying to troll me.”. Block grew up in Summit, New Jersey, and holds a law degree from Chicago-Kent College of Law. Carson Block, Muddy Waters founder Mr Block’s reputation precedes him. 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 … Did they cross the line? Muddy Waters, LLC is a pioneer in on-the-ground, freely published investment research. Carson Block, « short-seller » activiste, patron de Muddy Waters, fait trembler les géants de l’économie. Carson Block, Muddy Waters . Within two months of the report being published Sino-Forest’s CEO resigned. If he were such an insider, he asked, why would Goldman Sachs Group Inc. and Credit Suisse Group AG have turned down his business? Burford’s executives have remained defiant however, denying the allegations leveled at it and even seeking a US IPO later in 2020. (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. 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. 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 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. In January 2015, the firm raised an initial $100 million for its investment strategy. 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. It’s possible that some investors were less willing to fully accept an analysis of a non-Chinese company by Muddy Waters. 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. The stock declined throughout 2016, from a high of around 57.00 Euros before the report was published, down to a low of about 35 in December of 2016. For more information on the ongoing Luckin Coffee situation, visit our article on the topic. 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. “I’ve wondered, is there coordination with these hedge funds?” Block said in an interview on Bloomberg Television. In that interview he reaffirmed the short call, noted that most of the performance was related to technical reasons and the options market, along with friendly support form a major Chinese brokerage house. 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. You are leaving the Muddy Waters Capital (muddywaterscapital.com) website and going to the Muddy Waters Research website (muddywatersresearch.com). Bloomberg Markets Magazine named Mr. Block as one of the “50 Most Influential in Global Finance” in 2011. 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 company never recovered, despite their own investigations clearing themselves of any wrongdoing and threats to sue Carson Block. 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. The company is named after the Chinese proverb "渾水摸魚", meaning "muddy waters makes it easy to catch fish." 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. NQ’s largest customer by far is really NQ. All information on this site and in the following post should not be construed as investment advice or a specific recommendation. However, unlike many other of Muddy Waters’ targets, Ströer was able to shake off the negative report and the shares rebounded beginning in 2017. Dans une interview à Challenges, Carson Block, le fondateur du fonds activiste Muddy Waters, accuse Jean-Charles Naouri, patron de Casino, de le faire espionner depuis un an. Or if you wish to remain on the Muddy Waters Capital website, please select “No Thanks.” 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. More recently, he started releasing videos on zer0es.tv. Carson Block, Founder and Chief Investment Officer of Muddy Waters Capital, is among a group of investors blasting the Chinese for repeated bad … 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. Pourquoi l'action Solutions 30 a dévissé de plus de 50 % depuis le 9 décembre ? What Block agrees with is the growing sense that financial markets are overvalued and predominantly small investors will be hurt when the bubble finally bursts. 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. We estimate that its China paying user base is less than 250,000, versus the six million NQ claims. 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. Muddy Waters went on to describe exactly what they meant in their press release summarizing the report: Ströer’s governance reminds us of some of the companies we researched in China. 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. Muddy Waters is short XL Fleet Corp. (NYSE: XL) because it strikes us as middle of the fairway SPAC garbage. 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. 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’ 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. 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. 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. Connect with friends faster than ever with the new Facebook app. He previously operated a self-storage company there and even wrote the book on “Doing Business in China for Dummies.”. “When we get tagged as establishment, you can’t be more inaccurate than that,” he said. Prothena, while still trading today, is a shell of its former self, with its shares trading at a fraction of previous highs in 2017. See below for some of his biggest past calls and newest targets. But what others short calls did Block make to get to this point? 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 peels back the layers, often built up by seemingly respected but sycophantic law firms, auditors, and venal managements. 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. Par Beatrice Parrino Publié le 20/12/2018 à 09h00 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.”. 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. The stock then began a summer surge in early June, peaking at more than $131 per share in August. In one instance, Ströer agreed to buy a company from insiders before the insiders themselves even purchased it. He's been called the world's most feared short seller, causing nearly a dozen companies to be shut down or delisted. 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. For the moment, it’s an unproven theory. Carson Block said his Muddy Waters Capital “massively reduced” its short positions in recent days, mostly avoiding the buying frenzy that has burned at least two other hedge funds. — Carson Block, Muddy Waters LLC founder . Muddy Waters Capital Founder & CIO Carson Block joined Yahoo Finance's Jen Rogers, Myles Udland, and Dan Roberts to discuss his latest short call on GSX Techedu. Carson Block, the founder of Muddy Waters Capital, likes to talk about what a screwed up year 2020 was — on many levels. 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 … This is the call that made Carson Block and Muddy Waters a household name to most Western 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. 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.
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