(Bloomberg) – The Wall Street bounty hunter has finally found his match.
Andrew Left, who took over everything from pharmaceutical companies to Chinese real estate companies, said his Citron Research will no longer publish short sales surveys, ending the company’s two-decade period as one of Wall Street’s best-known opponents.
Instead, Citron will focus on what may seem to be the only logical move in a world of ever-increasing stock markets and low interest rates: long bets.
“Twenty years ago, I started Citron with the intention of protecting the individual against Wall Street – against fraud and stock promotions,” said Left in a video posted on YouTube. Since then, he added, the research store has lost focus: “In fact, we have become the establishment.”
Citron’s long bets more than doubled on average last year, Left said. And so, starting with a report on Monday, the company plans to launch ideas for companies that “can use the support of a whole new generation of shareholders who want to buy shares,” said Left.
Citron’s unlikely long-term turnaround in the shorts world came after an equally unlikely army of day traders, meeting on Reddit, led the research store to an impressive loss on its bearish bet on GameStop Corp.
Trading Frenzy
The commercial frenzy, which brought the hedge fund Melvin Capital to its knees, underscored how betting against stocks has increasingly become a Sisyphean venture. And it is even more so today, as the rise is fueled by a new generation of investors, stimulated by figures like Dave Portnoy proclaiming that “stocks always go up”.
“It’s a sign of how brutal and difficult it is,” said Marc Cohodes, who says he has known the founder of Citron for 20 years. “People who are bad would love nothing more than the lack of a small community. You can go through fraud after fraud after fraud because there is no one there to take you out of the market. “
Industry veterans hope others will follow the example of the left and stop publishing reports about their targets. Those who remain may have to adjust their approach.
“I hope he will continue to use his gift to eradicate market abuse,” said Fahmi Quadir, founder of the New York hedge fund Safkhet Capital, which does not publicly publish its research reports. “I wish him the best in his new plans.”
Left, 50, did not respond to requests for comment. Friday’s video did not specify whether he would stop selling shares.
Boiler rooms
Born in Detroit and raised by a mother who worked as an office manager and door-to-door salesman, Left studied political science at Northeastern University in Boston. He entered the world of finance in the early 1990s, filled with boiler rooms selling obscure stocks over the phone to anyone who bought them.
Left eventually started betting against stocks that were being pumped by brokers and published his research on easily distilled blog posts. He founded Citron Resarch – initially called StockLemons.com – around 2001.
The company published reports on dozens of companies, but its most prominent victory was Valeant Pharmaceuticals Inc., which Left called “pharmaceutical Enron”. The Justice Department, which later indicted two executives, gave Left an implicit nod in a statement, saying “investor websites” helped to reveal suspicious aspects of the deal.
Los Angeles-based Citron also published reports on companies that failed, such as airplane parts maker TransDigm Inc. and payment card company FleetCor Technologies Inc.
“He’s been an advantage anyway,” said Cohodes. “I like him and he is very good at what he does. It is simply impossible to sell shares at the moment. “
Highlighted prices
Left made the same point in his 2020 letter to investors. In the previous year, Citron moved away from Tesla Inc. and other stocks whose prices have become “unrelated to any underlying financial metrics,” he wrote, as the market became “increasingly dependent on psychology and less on business. “.
On January 19, Citron tweeted that GameStop, whose shares were close to $ 40 each after doubling in a few days, quickly half the price, unleashing an avalanche of criticism from day traders determined to prove that short sellers were wrong.
Citron later had to suspend a live broadcast scheduled to explain the call, saying there were “too many people hacking” his Twitter account. “I have never seen so much exchange of ideas from people so angry at someone for joining the other side of an operation,” Left said in a video he later posted.
On Wednesday, he said the research company covered most of GameStop’s shorts in the “90s with a 100% loss”.
GameStop’s stock rose to $ 328.50 at 12:57 in New York. The stock rebounded after several brokers, including Robinhood Markets Inc. and Charles Schwab Corp., imposed restrictions on trading in the shares earlier this week.
This year’s increase helped to inflict damage on some of the world’s most prominent hedge funds, most notably Gabe Plotkin’s Melvin Capital, which required a cash injection from billionaires Steve Cohen and Ken Griffin.
It came out on Friday still offered a word of caution to traders who stack on GameStop:
“If you choose to buy GameStop here, it’s caveat emptor.”
(Updates with investor comments in the eighth paragraph.)
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