Exclusive | Short seller Carson Block says he has a Hong Kong stock in sight
Carson Block, founder of Muddy Waters Research Group, says Hong Kong’s minimum public float of 25 per cent makes it easy for market manipulation as US firm looks to launch an attack in weeks to come
Muddy Waters Research Group, which has gained notoriety for exposing accounting frauds at publicly traded companies and subsequently profiting from their plunging stock prices, said it is taking aim at another Hong Kong company and is poised to launch an attack in the coming weeks.
“We have been doing a lot of work on Hong Kong-listed companies, and there might be a big call in the coming weeks,” Carson Block, founder of the California-based firm, said in a phone interview with the South China Morning Post.
Short sellers profit by selling high and buying low, in that order, betting that certain stock prices will tumble. Muddy Waters gives its shorts an additional nudge by releasing reports that allege fraud or other financial misdeeds that could cause prices to fall.
The company’s previous shorts included Toronto-listed plantations operator Sino-Forest Corp, Hong Kong-listed Superb Summit International Group and Noble Group.
Four months ago, it released a report claiming China Huishan Dairy Holdings, the country’s biggest operator of dairy farms, had inflated expenditure on its dairy farms by as much as 1.6 billion yuan (US$232.27 million), saying the company’s business was “worth close to zero”.
Huishan, based in the northeastern city of Shenyang, said the report contained misrepresentation and was “groundless”. Chairman Yang Kai swiftly accumulated more shares to build his defences.