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It's important to note that the company who wrote this report makes money by shorting stocks and then putting out negative reports about them. This is not to s
by fallingknife 6y ago
It's important to note that the company who wrote this report makes money by shorting stocks and then putting out negative reports about them. This is not to say that the allegations are false, and, in fact, many such reports by similar companies have been true, and excellent works of investigative journalism. However, this type of report often turns out to be nothing more than market manipulation and fraud. So all of these allegations should be taken with a grain of salt.
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Since multiple people asked, source is I used to trade a lot and have been in trades where entities like this have put out similar fraud reports that have turned out to be false, and also seen others that were true. Also it's common sense that you should always question statements from people who stand to benefit from them.
- logifail 6y ago> this type of report often turns out to be nothing more than market manipulation and fraud Source? Do authors of "this type of report" get investigated, tried and convicted of market manipulation/fraud often?
- notional 6y agoWhat kind of source are you expecting the op to provide?
- barney54 6y agoAnything other than an unsupported accusation. It could be a link a to Hindenberg being wrong in the past, for example.
- sydd 6y agoWhy do you think they make this investigation? I doubt because of public goodwill
- fallingknife 6y agohttps://www.dlapiper.com/en/us/insights/publications/2018/10/sec-fires-warning-shot-against/ https://www.dlapiper.com/en/us/insights/publications/2018/10...
- robjan 6y agoThe article does disclose that they hold no positions in cloverhealth which may or may not increase your confidence in the article.
- kritiko 6y agoTFA: "Usually, the gripe with short sellers is the business model (i.e.: making money when a stock goes down). We are taking that off the table for this one report so the investing public can more clearly see the work for what it is; deep-dive investigative research." They are clearly releasing it without a position because they're mad at Chamath. N.b. that it's also labelled as an initial disclosure.
- itsoktocry 6y ago>However, this type of report often turns out to be nothing more than market manipulation and fraud. So all of these allegations should be taken with a grain of salt. Define "often". More often than all of the banks and investment firms who own companies and put out "research" making fantastical claims about where the companies are going? It happens every day, non-stop. Why is that never questioned? Because stocks up = good. People who think you can change the fundamentals of any company simply by shorting it don't understand finance. Please provide evidence that one legitimate company has ever been put out of business by short-sellers.
- fallingknife 6y ago> Please provide evidence that one legitimate company has ever been put out of business by short-sellers. old goalposts ----------> new goalposts
- msoad 6y agoI really appreciate the short sellers in market actually. They balance the excess positivity in the market. if I work for or own shares of a public company, I love those guys to look into the company I work for. If they find out that my employer is cooking the books, they have done a massive service for me.
- giarc 6y agoChamath also made a good point on the All In Podcast yesterday. He said shorting allows people to have market neurtal portfolios.
- gridder 6y agoThis is a false dichotomy, DD can be done well by longs as well as shorts.
- msoad 6y agoif you're long, why would you publish a negative research?
- hervature 6y agoYou wouldn’t. If you are long, then you publish overly positive statements. Exactly what Chamath did. By saying you did due diligence and found nothing wrong. Or that everyone at the company are outstanding individuals. Now Clover Health being investing by the DOJ but Chamath presumably profited by the increased prices. This is the exact vile behavior that the hedge funds and “Wall St” is constantly accused of.
- gridder 6y agoDD is done before investing, for both longs and shorts. I don’t get your point.
- mrzimmerman 6y agoI think the contention is that places that are shorting stock AND writing articles about how badly run the shorted company is have a conflict of interest which damages the credibility of their reporting. I think it's fair to say the same thing of overly positive reports about a specific company coming from an institution that holds normal stock in that same company. It would probably be ideal if reports came from people who don't have a direct financial stake in the success or failure of the company they're writing about. However, I'll grant that the world doesn't often let us work with ideals for a lot of very valid reasons (retirement accounts, for instance).
- dcolkitt 6y ago> However, this type of report often turns out to be nothing more than market manipulation and fraud. This isn't true. Mountains of academic research has consistently shown that short sellers generate abnormal returns by detecting actual problems in the underlying company (often corporate fraud), not manipulating prices or spreading rumors. Short sellers are often vilified by CEOs because they act as a form of corporate governance. But that characterization is not supported by the empirical evidence. https://www.reddit.com/r/slatestarcodex/comments/la88gv/short_selling_much_more_than_you_wanted_to_know/ https://www.reddit.com/r/slatestarcodex/comments/la88gv/shor...
- deleted 6y ago[deleted]
- gridder 6y agoEmpirical evidence cannot be since shorting is legal. This is total BS. The concept of price efficiency is like missing the forest for the trees.
- fallingknife 6y agoShort sellers who put out reports like this represent only a small fraction of short selling. Most of it is done by large hedge funds like Melvin Capital, who just short.
- ffggvv 6y agoit’s important to note when chamath goes on cnbc and to promote his SPACs he also stands to make a lot of money and often it turns out to be nothing more than market manipulation nothing different between talking about short positions you have and long positions
- deleted 6y ago[deleted]
- diebeforei485 6y agoAlso, short sellers do other shady stuff. Like intimidating friends and family of people who work at the companies they are shorting. Look at what happened to Fairfax Financial and their CEO Prem Watsa. Short sellers mailed the pastor at Watsa's church, with a fake return address, claiming that he was a pervert and a fraud. They impersonated journalists, impersonated government investigators, and even harassed the dean of the business school at the University of Toronto. They filed a lawsuit against the short sellers in 2006 detailing all these activities, and that's what caused the attacks to stop. Elon was correct to call out the short sellers spreading FUD at every opportunity.
- synaesthesisx 6y agoA well-known fact in the industry is that most hedge funds (including shorts) don't actually know what they're doing, and rely on selling narratives so they can gamble with other people's money. The overwhelming majority can't even beat the S&P in performance. Short sellers are infamous for spreading massive FUD (Tesla was a prime target for years), and most continue their antics despite no longer having any credibility whatsoever.
- RockshotJohnson 6y agoTesla short sellers were definitely silly. But, it's not fair at all to compare hedge fund performance to the S&P. They hedge their market exposure (after all, it's in the name), and most market neutral hedge funds end up with a beta of around 0.2, meaning that if the market goes up by 1%, the fund will go up by 0.2% on average (plus their alpha).
- skinnymuch 6y agoHow are Tesla shorts silly? Can you name any other valuation of a company that is more detached from reality? People were clowning Gamestop when it was around $60-80 stock price (it has dropped below that now. Besides the pt) which gave it a market cap below $5B. Tesla at $800B is more insane. You and all of us have just gotten used to it.
- 6y ago
- mindfulplay 6y agoIt's nice to be able to take down people like Chamath in this way via the market itself. Chamath is one of those popularity seeking stunt masters who are actually charlatans behind the scenes.
- mgh2 6y agoShorting is a risky business, since there is a higher probability for losses/gains due to the nature of the process. Shorters operate in a high risk, high reward scenario- they do due diligence to reveal frauds and get compensated, when the SEC is short handed for investigations (no pun intended). Of course there are bad actors who promote lies (ex: using social media), but it is all in the hands of the short seller. For reference, they are the same firm that released Nikola's infamous fraud report https://hindenburgresearch.com/nikola/ https://hindenburgresearch.com/nikola/
- addicted 6y agoThese "short" companies are the only ones who have any incentive to expose negatives about publicly traded stocks. Everyone else in the financial and real worlds have massive incentives to prop up the values of stocks and push them higher, including executives and the board who have inside information as well. It amazes me that people think the shorts are the ones to worry about.