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I've only sold short one company. It was called Parateum, and claimed to sell IoT products to telecoms in emerging economies. They were worth about $550 million
by missedthecue 4y ago
I've only sold short one company. It was called Parateum, and claimed to sell IoT products to telecoms in emerging economies. They were worth about $550 million at the time.
It caught my eye when I was looking through their accounts and saw a very dubious clause that defined the way they recognized revenue. Basically it said management can unilaterally decide when revenue happens, and they were deciding it happened whenever they dispersed a press release about a supposed new major contract being signed. The money never existed.
I decided they were a fraud for certain when I used Google Earth to search the addresses of their offices in various countries they claimed to do business in. Time after time, the result was a dead end dirt road in the African bush, or some dingy hovel in South East Asia occupied by a suspicious looking night club.
It was that easy. I had the short on for about a year until a major hedge fund released a report on it. Shares fell ~90% pretty quickly. They've been delisted since.
- zone411 4y agoI shorted this Nasdaq-listed fraud: https://www.sec.gov/litigation/litreleases/2020/lr24706.htm https://www.sec.gov/litigation/litreleases/2020/lr24706.htm. It was a wild story that included a 2000% price increase after they bought a blockchain company, Russell 2000 inclusion and reversal, a CEO who is "a true believer in disruptive technologies and believes that every piece of information is worth millions [and] in the alchemy of structured trade finance," CNBC appearances, a picture of their U.S. operations consisting of three empty desks, and a long trading halt. https://www.cnbc.com/2018/04/04/controversial-crypto-stock-longfin-surges-then-halted-after-its-announced-ceo-to-appear-on-cnbcs-fast-money.html https://www.cnbc.com/2018/04/04/controversial-crypto-stock-l... https://www.wsj.com/articles/longfin-collapse-puts-focus-on-lax-ipo-rules-1522788520 https://www.wsj.com/articles/longfin-collapse-puts-focus-on-...
- baobabKoodaa 4y agoI assume you got out before the delisting?
- missedthecue 4y agoI did, but even if you didn't you can still buy back the shares on the OTC market and close your position. The company is now only worth $600k. I should have waited!
- everybodyknows 4y agoIndeed, or otherwise not tradeable. How would a broker treat a customer's short position in, say RSX? https://www.cnbc.com/quotes/RSX?qsearchterm=rsx https://www.cnbc.com/quotes/RSX?qsearchterm=rsx
- baobabKoodaa 4y ago> How would a broker treat a customer's short position in, say RSX? Matt Levine has done a nice writeup about these cases. Basically, you're stuck loaning the stock, so you keep paying loan fees. If you're unable to close the short, you're stuck paying those fees forever, and you never make an actual profit on the short.
- deleted 4y ago[deleted]