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Has anyone else publicly copied the Hindenburg investigation/financial model? It's not proprietary AFAIK.

deleted 2y ago
[deleted]
rafram 2y ago
https://www.newyorker.com/news/annals-of-communications/is-hunterbrook-media-a-news-outlet-or-a-hedge-fund https://www.newyorker.com/news/annals-of-communications/is-h...
steveBK123 2y ago
It's a hard business to make money in. Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists. Plus the last 2 years we've seen 20+% market moves upwards. Despite it being a necessity for functioning markets, when you are short, seemingly everyone is against you - business management, regulators, media, etc. Not surprised to see them bow out. Chanos did so last year. This is one of the reasons frauds go on so much longer than you'd expect - no one wants to hear the truth.
- tines 2y ago
  > Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists Also, with shorting the best you can do is double your money (if the stock goes to 0), while you can lose an unlimited amount (as there’s no cap on a rising stock); whereas with going long, you can only lose all your money (again, if it goes to 0), but you can gain an unlimited amount.
  - ryandamm 2y ago
    Except for leverage... but the general point remains that the upside is capped and the downside in theory is not.
  - handfuloflight 2y ago
    See put options.
    - NickC25 2y ago
      The song remains the same - the stock can only go to zero. The upside of a put is effectively capped at (strike price minus stock price) * 100. Going long via shares or calls is unlimited.
      - twic 2y ago
        Right, but the price of the put is much less than the price of the stock, and the price of the put is the denominator. Right now, Walmart is at $91.34, and you can buy a put at $88 expiring on 24th January for $0.18 [1]. If you buy one, and the stock goes to zero by then, you spent $0.18 and gained $88, a 488x return. January 2026 at $86.67 is $5.35 - a mere 16x return. [1] https://www.nasdaq.com/market-activity/stocks/wmt/option-chain https://www.nasdaq.com/market-activity/stocks/wmt/option-cha...
        NickC25 2y ago
        You'd spend $0.18 per share, yes, but the option's price is $18, not $0.18. So your return would be roughly 4.1x, not 488x. Remember options contracts are counted in hundreds, so $0.18 is the price per share, not per contract.
        twic 2y ago
        If you're going to work it out per options contract, then you spend $18, and get to sell 100 shares at $88. 100 * $88 / $18 is still 488x. (This number is large because Walmart is not going to go bust in the next few days! It serves to illustrate the arithmetic, but maybe it's not the most realistic example.)
  - dktp 2y ago
    This is incorrect. The way shorting works is you borrow a stock (and keep paying premium for the duration) and sell it Premiums are usually small, so you can make many multiples of paid premium And since their business model is releasing the findings, which in turn makes the stock drop, they can time their short position very well and don't need to pay premiums for long
    - tines 2y ago
      I think you misunderstood what I meant by "your money" in "double your money" (and I was unclear). You can only earn the value of the stocks you borrow. When trading long, the gain is unlimited. According to Investopedia, "the Federal Reserve Board requires all short sale accounts to have 150% of the value of the short sale at the time the sale is initiated" so it's the same principle as going long with margin. You can leverage yourself but there's a limit.
      - dgacmu 2y ago
        Yes, but borrowing short is fundamentally leveraged. As long as the stock doesn't increase in value, you don't need much of your own cash to secure it - because you're holding the cash from selling it. But, of course, that gets ugly when the stock goes up; that's when you have to start putting your own money in against the borrow.
      - BeetleB 2y ago
        You borrow 10 shares that are currently worth $10 each. You immediately sell and get $100. The price drops to $1 per share. You spend $10 to buy those shares and return your loan. So you spent $10 and made $90. That's a 9x gain. Yes you cannot make more than $100. But of course you can! Do the short on 1000 shares instead of 10. The more confident you are of the share price going down, the more shares you borrow. Unlimited upside.
        Dylan16807 2y ago
        You need to put up a lot more than $10 to do that borrow. Quite limited upside.
- tart-lemonade 2y ago
  People have this idea that short sellers are market manipulators who conspire to wipe out innocent day traders' life savings and trigger mass layoffs with the stroke of a pen (hence the term "financial terrorism," which is absolutely comical in its hyperbole but used with complete sincerity by the anti-short crowd), but like tines said, it's a risky business that requires lots of research that frequently goes nowhere with limited upside and uncapped potential losses. The amount of times they and other short sellers publish damning evidence on a company only for the stock to shoot back as soon as the company releases a "nothing to see here" non-response really shows the difficulty in making money in the space (and how much people want to bury their heads in the sand). Given the regulatory environment we are heading into, I expect short selling will become an even riskier business since the SEC isn't going to be prosecuting fraud anymore (or rather, they'll be doing even less than they are now), making it much easier to sic the lawyers on firms like Hindenburg. Even though this isn't their stated reason for bowing out, I wouldn't be surprised or hold it against them if it was a factor.
  - Over2Chars 2y ago
    I think the prospect of an impending SEC or other investigation is only one factor in stocks losing value. They highlight inflated sales and financial irregularities like a chain of companies that engage in self-dealing, but are portrayed as independent to hide their real ownership, and so on. If you believe what they say, your faith in the company is shaken because they're pulling a con job on you to invest in them and believe their story. If the SEC investigates that just supports the claim that it's a con. If they don't investigate - for whatever reason - it doesn't mean that it's not a con and you won't lose all of your money believing it. So a change in the regulatory environment is only one element. For example, the Modhi/Adani thing is outside the reach of the SEC. And after watching a piece on it, apparently shorting it was amazingly tricky, and they had to go through some Singaporean markets to arrange a short position.
  - jonstewart 2y ago
    SEC Commissioners turn over slowly. It is not quite as independent as Fed, but more independent than most agencies.
- 1024core 2y ago
  > Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists. ... and the market can stay irrational longer than you can stay solvent. I remember once I tried shorting a stock, of a market leader in my area. I knew the field well enough to see that they were trying to fudge some numbers and their quarter was _not_ as good as they had claimed it to be. But sadly the market didn't see this and the stock went up. E*Trade started pushing me to cover my positions, and eventually I ended up losing a 5-figure sum (nothing earth-shattering, but still a good chunk of my cash). After I had bought it all back, slowly the market realized what I had seen and the stock dropped as I had expected. Unfortunately I did not have the deep pockets to stick around long enough; all I was left with was a hole in the wallet and a hard lesson learned.
  - xsmasher 2y ago
    Somebody say the thing please
- cushychicken 2y ago
  I’d wager a big part of how they make money is as SEC whistleblowers. It’s not as huge of money as shorting is - but it’s typically a single digit percentage of the recovered fines. Considering these guys nailed a company that defrauded people of $3 BILLION dollars, they’d net $30 mil from turning that company in even if the payout is only 1%. The SEC has a policy of paying out part of recovered fines as bounties to whistleblowers to align incentives. If your company is doing something sketchy, you get a payout by doing the right thing. I’m not a lawyer but I think that mechanism works just as well if you’re an external reporter of fraud. SEC makes money and pays you for your diligent forensic auditing.
  - hn_throwaway_99 2y ago
    Do you have any evidence/links that discuss this? I'd be surprised that they'd get any whistleblower fees, because they themselves aren't actually the whistleblower. E.g. a whistleblower usually refers to actual insiders with private knowledge that then "blow the whistle". In Hindenburg's case, they basically just did research anyone is capable of doing (although in many cases, after they became known, they did have whistleblowers reach out to them).
    - yieldcrv 2y ago
      This bounty program doesn’t require being an employee Astute observers and outsiders - doing the same thing prolific short sellers do - have received some of the biggest bounty payouts The source is on the SEC’s bounty payout page
    - deleted 2y ago
      [deleted]
  - yieldcrv 2y ago
    Its 10% to 30% where did you get 1% from, its a really good bounty system to clean up the markets and you get to be anonymous if you use a lawyer, the trick is to get the SEC to prioritize it. They are now inundated after some large payouts made the news in financial circles
- gimmeThaBeet 2y ago
  Matt Levine always has the good stuff, but he had commentary on a profile of Jim Chanos (the lesson not necessarily being specific to Chanos) that always sticks with me. The profile that discussed the idea that the real sort of 'secret sauce' was that the combination of Chanos' main funds were like 190% long, and then 90% the short stuff he wan known for. On its surface, nothing crazy for long/short funds, the notable part was that basically all the effort was on the short side, and the long side was implied to be very humdrum. And the short book had like negative returns over a long period. It just struck me as a really elegant (if extreme) example of what uncorrelated returns can do if you do somehow have some edge over time. And I'm not sure what Hindenburg's holistic picture is, but whether rightly or wrongly now I usually assume most of the kind of very public shorts operate similarly. I was never really on board with the "short sellers are evil" train of thought, but I did believe, "oh these very public short sellers only short things, they just go around all the time thinking everything is awful". And my assumption now is that they are like, kind of really theatric long/short funds. Matt had some line like if you extremely good at something, you can get rich doing it, even if it loses money. As long as it's not correlated.
ipsum2 2y ago
There's quite a lot of short sellers that publish their research.
JamesLeonis 2y ago
They are planning to release their methodology. Buried in the article: > Beyond my own desire for relief, it also feels selfish to keep the knowledge we’ve accumulated trapped within our small team. I have more than enough. In the past several years we’ve been flooded with thousands of messages from many of you asking how we do what we do, or whether you can join the team. I read them all and I’ve been trying to figure out how to respond in a way that can answer everyone—so over the next 6 months or so I plan to work on a series of materials and videos to open-source every aspect of our model and how we conduct our investigations.
Over2Chars 2y ago
Aside from the obvious risk of short selling is the tornado of lawsuits and threats that arise from targeting shady companies. Just because some company is accused shenanigans or breaking the law doesn't mean they won't try to litigate you out of existence. Or that they don't have associates with baseball bats who might visit you in the night to discuss your "bad choices". It takes some real minerals.
ProjectArcturis 2y ago
I believe Andrew Left and Citron Research were the first.
paxys 2y ago
What they do isn't anything new or revolutionary. Short sellers have existed ever since public markets have existed. See Muddy Waters Research, Citron Research, Kynikos Associates, Pershing Square (famous for their crusade against Herbalife), Gotham Research, all of the Big Short folks. And these are just the active ones.
anotheruser13 2y ago
Take a look at Scorpion Capital.
- rhcom2 2y ago
  Who were pretty much right about Ginkgo Bioworks (DNA)
lokar 2y ago
Yes: https://hntrbrk.com/about-us/ https://hntrbrk.com/about-us/
molsongolden 2y ago
Muddy Waters has been around for a while and had some high profile hits.
karel-3d 2y ago
You need to have a very thick skin, because the shorted will come at full force against you. I have read somewhere (long ago forgot where) that the only country this can work is America; in other countries, he would need to be scared for his actual life. Adani, for example, is in bed with India government.

deleted 2y ago

[deleted]

https://www.newyorker.com/news/annals-of-communications/is-hunterbrook-media-a-news-outlet-or-a-hedge-fund https://www.newyorker.com/news/annals-of-communications/is-h...

steveBK123 2y ago

It's a hard business to make money in. Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists. Plus the last 2 years we've seen 20+% market moves upwards. Despite it being a necessity for functioning markets, when you are short, seemingly everyone is against you - business management, regulators, media, etc. Not surprised to see them bow out. Chanos did so last year. This is one of the reasons frauds go on so much longer than you'd expect - no one wants to hear the truth.

tines 2y ago
> Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists Also, with shorting the best you can do is double your money (if the stock goes to 0), while you can lose an unlimited amount (as there’s no cap on a rising stock); whereas with going long, you can only lose all your money (again, if it goes to 0), but you can gain an unlimited amount.
- ryandamm 2y ago
  Except for leverage... but the general point remains that the upside is capped and the downside in theory is not.
- handfuloflight 2y ago
  See put options.
  - NickC25 2y ago
    The song remains the same - the stock can only go to zero. The upside of a put is effectively capped at (strike price minus stock price) * 100. Going long via shares or calls is unlimited.
    - twic 2y ago
      Right, but the price of the put is much less than the price of the stock, and the price of the put is the denominator. Right now, Walmart is at $91.34, and you can buy a put at $88 expiring on 24th January for $0.18 [1]. If you buy one, and the stock goes to zero by then, you spent $0.18 and gained $88, a 488x return. January 2026 at $86.67 is $5.35 - a mere 16x return. [1] https://www.nasdaq.com/market-activity/stocks/wmt/option-chain https://www.nasdaq.com/market-activity/stocks/wmt/option-cha...
      - NickC25 2y ago
        You'd spend $0.18 per share, yes, but the option's price is $18, not $0.18. So your return would be roughly 4.1x, not 488x. Remember options contracts are counted in hundreds, so $0.18 is the price per share, not per contract.
        twic 2y ago
        If you're going to work it out per options contract, then you spend $18, and get to sell 100 shares at $88. 100 * $88 / $18 is still 488x. (This number is large because Walmart is not going to go bust in the next few days! It serves to illustrate the arithmetic, but maybe it's not the most realistic example.)
- dktp 2y ago
  This is incorrect. The way shorting works is you borrow a stock (and keep paying premium for the duration) and sell it Premiums are usually small, so you can make many multiples of paid premium And since their business model is releasing the findings, which in turn makes the stock drop, they can time their short position very well and don't need to pay premiums for long
  - tines 2y ago
    I think you misunderstood what I meant by "your money" in "double your money" (and I was unclear). You can only earn the value of the stocks you borrow. When trading long, the gain is unlimited. According to Investopedia, "the Federal Reserve Board requires all short sale accounts to have 150% of the value of the short sale at the time the sale is initiated" so it's the same principle as going long with margin. You can leverage yourself but there's a limit.
    - dgacmu 2y ago
      Yes, but borrowing short is fundamentally leveraged. As long as the stock doesn't increase in value, you don't need much of your own cash to secure it - because you're holding the cash from selling it. But, of course, that gets ugly when the stock goes up; that's when you have to start putting your own money in against the borrow.
    - BeetleB 2y ago
      You borrow 10 shares that are currently worth $10 each. You immediately sell and get $100. The price drops to $1 per share. You spend $10 to buy those shares and return your loan. So you spent $10 and made $90. That's a 9x gain. Yes you cannot make more than $100. But of course you can! Do the short on 1000 shares instead of 10. The more confident you are of the share price going down, the more shares you borrow. Unlimited upside.
      - Dylan16807 2y ago
        You need to put up a lot more than $10 to do that borrow. Quite limited upside.
tart-lemonade 2y ago
People have this idea that short sellers are market manipulators who conspire to wipe out innocent day traders' life savings and trigger mass layoffs with the stroke of a pen (hence the term "financial terrorism," which is absolutely comical in its hyperbole but used with complete sincerity by the anti-short crowd), but like tines said, it's a risky business that requires lots of research that frequently goes nowhere with limited upside and uncapped potential losses. The amount of times they and other short sellers publish damning evidence on a company only for the stock to shoot back as soon as the company releases a "nothing to see here" non-response really shows the difficulty in making money in the space (and how much people want to bury their heads in the sand). Given the regulatory environment we are heading into, I expect short selling will become an even riskier business since the SEC isn't going to be prosecuting fraud anymore (or rather, they'll be doing even less than they are now), making it much easier to sic the lawyers on firms like Hindenburg. Even though this isn't their stated reason for bowing out, I wouldn't be surprised or hold it against them if it was a factor.
- Over2Chars 2y ago
  I think the prospect of an impending SEC or other investigation is only one factor in stocks losing value. They highlight inflated sales and financial irregularities like a chain of companies that engage in self-dealing, but are portrayed as independent to hide their real ownership, and so on. If you believe what they say, your faith in the company is shaken because they're pulling a con job on you to invest in them and believe their story. If the SEC investigates that just supports the claim that it's a con. If they don't investigate - for whatever reason - it doesn't mean that it's not a con and you won't lose all of your money believing it. So a change in the regulatory environment is only one element. For example, the Modhi/Adani thing is outside the reach of the SEC. And after watching a piece on it, apparently shorting it was amazingly tricky, and they had to go through some Singaporean markets to arrange a short position.
- jonstewart 2y ago
  SEC Commissioners turn over slowly. It is not quite as independent as Fed, but more independent than most agencies.
1024core 2y ago
> Shorting tends to be intrinsically harder because the market goes up over time and Americans are generally optimists. ... and the market can stay irrational longer than you can stay solvent. I remember once I tried shorting a stock, of a market leader in my area. I knew the field well enough to see that they were trying to fudge some numbers and their quarter was _not_ as good as they had claimed it to be. But sadly the market didn't see this and the stock went up. E*Trade started pushing me to cover my positions, and eventually I ended up losing a 5-figure sum (nothing earth-shattering, but still a good chunk of my cash). After I had bought it all back, slowly the market realized what I had seen and the stock dropped as I had expected. Unfortunately I did not have the deep pockets to stick around long enough; all I was left with was a hole in the wallet and a hard lesson learned.
- xsmasher 2y ago
  Somebody say the thing please
cushychicken 2y ago
I’d wager a big part of how they make money is as SEC whistleblowers. It’s not as huge of money as shorting is - but it’s typically a single digit percentage of the recovered fines. Considering these guys nailed a company that defrauded people of $3 BILLION dollars, they’d net $30 mil from turning that company in even if the payout is only 1%. The SEC has a policy of paying out part of recovered fines as bounties to whistleblowers to align incentives. If your company is doing something sketchy, you get a payout by doing the right thing. I’m not a lawyer but I think that mechanism works just as well if you’re an external reporter of fraud. SEC makes money and pays you for your diligent forensic auditing.
- hn_throwaway_99 2y ago
  Do you have any evidence/links that discuss this? I'd be surprised that they'd get any whistleblower fees, because they themselves aren't actually the whistleblower. E.g. a whistleblower usually refers to actual insiders with private knowledge that then "blow the whistle". In Hindenburg's case, they basically just did research anyone is capable of doing (although in many cases, after they became known, they did have whistleblowers reach out to them).
  - yieldcrv 2y ago
    This bounty program doesn’t require being an employee Astute observers and outsiders - doing the same thing prolific short sellers do - have received some of the biggest bounty payouts The source is on the SEC’s bounty payout page
  - deleted 2y ago
    [deleted]
- yieldcrv 2y ago
  Its 10% to 30% where did you get 1% from, its a really good bounty system to clean up the markets and you get to be anonymous if you use a lawyer, the trick is to get the SEC to prioritize it. They are now inundated after some large payouts made the news in financial circles
gimmeThaBeet 2y ago
Matt Levine always has the good stuff, but he had commentary on a profile of Jim Chanos (the lesson not necessarily being specific to Chanos) that always sticks with me. The profile that discussed the idea that the real sort of 'secret sauce' was that the combination of Chanos' main funds were like 190% long, and then 90% the short stuff he wan known for. On its surface, nothing crazy for long/short funds, the notable part was that basically all the effort was on the short side, and the long side was implied to be very humdrum. And the short book had like negative returns over a long period. It just struck me as a really elegant (if extreme) example of what uncorrelated returns can do if you do somehow have some edge over time. And I'm not sure what Hindenburg's holistic picture is, but whether rightly or wrongly now I usually assume most of the kind of very public shorts operate similarly. I was never really on board with the "short sellers are evil" train of thought, but I did believe, "oh these very public short sellers only short things, they just go around all the time thinking everything is awful". And my assumption now is that they are like, kind of really theatric long/short funds. Matt had some line like if you extremely good at something, you can get rich doing it, even if it loses money. As long as it's not correlated.

ipsum2 2y ago

There's quite a lot of short sellers that publish their research.

JamesLeonis 2y ago

They are planning to release their methodology. Buried in the article: > Beyond my own desire for relief, it also feels selfish to keep the knowledge we’ve accumulated trapped within our small team. I have more than enough. In the past several years we’ve been flooded with thousands of messages from many of you asking how we do what we do, or whether you can join the team. I read them all and I’ve been trying to figure out how to respond in a way that can answer everyone—so over the next 6 months or so I plan to work on a series of materials and videos to open-source every aspect of our model and how we conduct our investigations.

Over2Chars 2y ago

Aside from the obvious risk of short selling is the tornado of lawsuits and threats that arise from targeting shady companies. Just because some company is accused shenanigans or breaking the law doesn't mean they won't try to litigate you out of existence. Or that they don't have associates with baseball bats who might visit you in the night to discuss your "bad choices". It takes some real minerals.

ProjectArcturis 2y ago

I believe Andrew Left and Citron Research were the first.

paxys 2y ago

What they do isn't anything new or revolutionary. Short sellers have existed ever since public markets have existed. See Muddy Waters Research, Citron Research, Kynikos Associates, Pershing Square (famous for their crusade against Herbalife), Gotham Research, all of the Big Short folks. And these are just the active ones.

anotheruser13 2y ago

Take a look at Scorpion Capital.

rhcom2 2y ago
Who were pretty much right about Ginkgo Bioworks (DNA)

lokar 2y ago

Yes: https://hntrbrk.com/about-us/ https://hntrbrk.com/about-us/

molsongolden 2y ago

Muddy Waters has been around for a while and had some high profile hits.

karel-3d 2y ago

You need to have a very thick skin, because the shorted will come at full force against you. I have read somewhere (long ago forgot where) that the only country this can work is America; in other countries, he would need to be scared for his actual life. Adani, for example, is in bed with India government.