Carson Block – The Prince of Short Selling (Muddy Waters Research Capital LLC) скачать в хорошем качестве

Carson Block – The Prince of Short Selling (Muddy Waters Research Capital LLC)

As a former equity analyst, entrepreneur in China, lawyer and current short seller / hedge fund manager, Carson Block has tried his hand at a wide range of professional activities – successfully most of the times. What catapulted him to the limelight in the world of finance, though, was his successful takedown of Orient Paper – a US-listed Chinese microcap with shady financials. The report – the first of many over the years – showed the company for the Potemkin village that it was: while Orient Paper truthfully reported revenue figures to regulators in China, it took a more ‘creative’ approach in the US, where it exaggerated revenue by a factor of 27. The existence of a good chunk of their purported customers couldn’t even be verified! In summation, Orient Paper was all smoke and mirrors: the stock price plummeted and Carson Block found himself in the international limelight. Muddy Waters Research’s next target got delisted and 2011 saw Carson Block on the winning side of a bet against billionaire John Paulson, who lost $500 million on Sino-Forest – another US-listed Chinese company. Muddy Waters have since then put out reports on companies all over the world and Block launched his own hedge fund – Muddy Waters Capital LLC – in 2015, after an initial investment of $100 million. The fund has performed well, returning 16% in 2016, 15% in 2017, and 20% in 2018. Since Muddy Waters publicize their shorts to great fanfare and with lengthy reports and sometimes even video content, I decided to run a simulation based on these reports. Since we evaluate this hypothetical portfolio’s returns across different time horizons ranging from 1 month to 1 year, my analysis covers 10 short positions between May 2017 and July 2019. I could have tried to include older data, but a decent number of companies have been delisted or gone bankrupt following Muddy Waters’ report, so the price data isn’t readily available. The average return one year after the initiation of a short position was 20.85%, indicating it might be profitable to pay close attention to Carson Block’s work. Unfortunately there’s a catch, and that is the fact that long-drawn suspensions/trading halts can turn a winning trade into a quagmire of losses. Take China Huishan Dairy HD, for example.Block correctly predicted the company would go to zero; it dropped more than 90% in one day and was promptly suspended. Anyone who didn’t close their short that same day probably lost money, because the stock was only delisted over 2.5 years after the initial suspension. Because short sellers need to borrow stock to short a company, they incur borrow fees at a certain percentage per annum – regardless of whether the stock trades or not. If the stock doesn’t trade, you have no way of closing your position, meaning you have to keep paying stock-loan fees for an indeterminate period of time: weeks, months, and in some cases, even years! Such was the case of China-Biotics, which remained in the Depository Trust & Clearing Corporation’s – Wall Street’s clearinghouse – ledger long after the company had ceased operations, all the while costing short sellers hundreds of thousands of dollars in borrow fees!