Posted on Oct 23, 2020 at 8:00 a.m.
In their communication war with companies, short sellers have a new tool to reach a larger audience and convince them in the direction of their interests, lower prices. These specialists, who are speculating on the decline, now have their own free television channel on the Internet (www.Zer0esTV. Com). Created by Carson Block, the founder of Muddy Waters Research, and produced by business finance economics broadcaster RealVision, it ensures that“We will not see bank analysts or company executives”, who peddle “Wall Street spiel”. “You will find exclusive information there”, promises the chain. The short seller will continue, once a year, to award the “Oscar” of finance to those who have distinguished themselves by their prowess in fraud.
Fraud and bankruptcy
These programs, sometimes in long formats (from 30 minutes to 1 hour), provide a detailed explanation of the often complex thesis of a short seller. He exposes to the general public this atypical approach to investing which consists in betting on the fall of a stock in order to make money. Carson Block recalls that there are two kinds of short sellers. The first (long / short hedge funds) bet on the fall of a security because it is too expensive with regard to its fundamentals (results, growth prospects…). The anticipated decline is limited. The latter, which includes Muddy Waters, anticipate the fall in value for much more serious reasons: fraud, accounting manipulation, embezzlement, money laundering, management enrichment… These embezzlements are more difficult and time consuming to reveal – “It’s like solving a puzzle” -, but the ” return on investment “ of the short seller is much higher. The stock can drop to zero. “There are ‘bad students’ in all sectors but some are more susceptible to abuse”, Carson Block believes. In the commodities sector, companies have more leeway to enhance the value of their assets and groups benefit from it.
Psychopaths and Liars
This television also gives voice to members of this community such as Jim Chanos and Kyle Bass, who deal with risky sectors such as commercial real estate and companies deemed problematic such as Health Insurance Innovations (42 American states are carrying out surveys on its activity), Medifast (pyramid scheme for weight loss diets) and Nano-X Imaging, a company “Too good to be true”. Bethany McLean, reporter at “Vanity Fair” talks about psychopathic and liar leaders, and what are the signs to flush out fraudsters. In March 2001, the one who was then a reporter for the magazine “Fortune” had questioned the “business model” and the inextricable accounting of the Enron group, which went bankrupt 9 months later.