Short sellers were positioning themselves for a RYB slump even before claims of abuses surfaced
The short sellers targeting RYB, could well have based much of their decision making on the company’s 200-plus page prospectus document, in which it strangely devoted 37 pages to the risks facing its business
Short sellers were already setting RYB Education up for a plunge in its share price, even before its kindergarten in Beijing was put under investigation over allegations of child abuse.
Shares in the New York-listed company have risen steadily since its debut in September, with short-sellers increasing their bearish wagers.
Shorting interest in RYB rose to its highest level on October 31, according to data compiled Bloomberg.
That was just three weeks before allegations and complaints among parents began to surface and spread that some children at the outlet in Beijing’s Chaoyang district had been found with needle marks on their bodies, and further allegations of children being drugged and sexual abuse.
The company’s shares plunged 38 per cent in overnight trading last Friday, sending the stock below its initial public offering price of US$18.50.
