Sino-Forest tumbled in June after Carson Block, a short seller, said the company exaggerated its timber holdings.
FORBES: Sino-Forest Eyes 'All Options' For Shareholders, But Doubts Persist
The Securities and Exchange Commission accused the firm of failing to disclose the role of a short seller in constructing a pool of mortgage-related assets sold to investors.
On the one hand it is clear that Alfred Little is a short seller who has a financial motivation to portray his findings in the most negative light possible.
The SEC should be criticized severely for doing away with the uptick rule on short-selling--no shorting of a stock unless it has moved up in price--and for its failure to enforce rules against naked short-selling--requiring a short seller to first borrow a stock before he shorts it.
Part of what makes it so hard to be a successful short seller is that you must swim against the tide of popular opinion.
Such share discrepancies can result from innocent errors or from something more: naked short sales of Pegasus stock, meaning a short-seller has not properly gotten dibs on shares to borrow before selling.
Chief cheerleader in this self-serving effort has been Steve Eisman, a prominent short seller who contends that for-profit colleges, much like subprime lenders, sucker the poor and uneducated into borrowing more money than they could ever pay back.
Ambac shares have lost 90% of their value since January 2007 and William Ackman, a short-seller who runs the hedge fund Pershing Square Capital, has railed against them (to his own benefit), saying the bond insurers could be insolvent by the second quarter because of their exposures to the structured finance market.
Nonetheless, Chanos discussed what was required to be a successful short-seller, which included accepting that the conventional wisdom about a stock is wrong.
McCain also criticized Mr. Cox for eliminating a trading rule that acted as a speed bump to prevent short-seller from pounding a stock.
WSJ: McCain Says Cox Should Be Fired As SEC Chief Amid 'Casino' Markets
In fact, if Metzler is getting a 13% annual fee on NovaStar, then Smith Barney is probably charging the short-seller a bit more than that.
With a short sale, the seller is asking the bank to take less than the amount owed.
Assuming the possibility that the short-seller's bearishness is unwarranted--which is a lot of the time--the seller, seeking to avoid losses on shares sold short, must re-enter the market in order to buy back the shares at a loss so that they can be returned.
The 2013 wrinkle is inviting a bear into the bull pen, with short seller Doug Kass playing the role.
FORBES: As Buffett Meets Investors, A View From Inside The Berkshire Family
Citron is treading the same path as short-seller Muddy Waters, which scored a bullseye in exposing fraud at Toronto-listed Sino-Forest, and more mixed results elsewhere.
FORBES: Chinese Property Developer Evergrande Slumps After Website Claims Fraud
Figuring he'd spotted an institution working a big sell order with a clever computer program, Park sold the stock short every time the seller showed up.
The short thesis rests on the notion that the FTC has been asleep at the switch, missed a massive fraud for over three decades, and will shortly awaken (at the behest of hedge fund short seller) to shut down the Company.
FORBES: Hedge Funds Fight Over Herbalife: Loeb Calls Ackman's Short Thesis 'Preposterous'
The rules currently give a buyer's broker the option--but not mandate--to buy-in the short-seller's undelivered shares--that is, purchase the undelivered shares in the market and charge the seller's broker the cost of doing so.
The company supplies components for Apple Computer's iMac, a hot seller in the U.S. But Bernard Tan of Merrill Lynch has downgraded NatSteel's short-term rating to neutral, although he still has a long-term buy on it.
Predictably, short-seller advocacy groups lamented the toughness and cost burdens of the new regulations, under which a trader wanting to short a particular stock has to find a price above the prevailing national best bid and offer price if the stock has already fallen 10% or more from the previous trading session.
FORBES: SEC's New Circuit Breaker Falls Short Of Uptick Rule
应用推荐