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Short selling
mullokintyre
post Posted: Feb 17 2020, 12:10 PM
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In Reply To: mullokintyre's post @ Feb 13 2020, 04:58 PM

James Kirby writing in the Weekend OZ

QUOTE
Big super funds that finance short-selling — especially industry funds that strive to take the higher ground in ethical investing — must surely be wincing at a remarkable story in the courts this week surrounding one of the nastier “short attacks” we have ever seen in Australia.

In principle, shorting keeps the sharemarket healthy. It spots weakness and, at its best, forces companies to clean up their act. (Shorting is where an investor borrows a stock for a fee, sells the stock, waits for the price to fall then buys it back, hopefully at a lower price.)

But how short funds actually work in practice is another matter altogether: a court judgment this week would seem to confirm our worst fears about shorts and how they operate in practice.
Many investors don’t like their super funds lending to shorters because they worry it can be unethical: they find it hard to see why their own super fund wants to ­finance an activity that can be trying to “short” the very same shares they probably own.

For example, it is beyond doubt our major super funds over the last year would have been holding JB Hi-Fi while also lending to shorts who were betting the JB Hi-Fi share price would fall (JB Hi-Fi has been consistently among the most shorted stocks in the market).

On Wednesday, Justice David Hammerschlag in the NSW Supreme Court gave Bonitas a beating around the ears that was something to behold.

Hammerschlag said the Bonitas report on Rural Funds was “materially misleading” and then he hit them between the eyes with this: “They (Bonitas) never took the trouble to check with or inquire as to any material which they broadcast … I have no difficulty in concluding that they did not care whether what they were saying was false.”

So it turns out that apart from the issues highlighted in that last statement from Hammerschlag, the self-described “activist short-seller” released a scathing report to start a short attack on an ASX-listed company, then instantly bunkered down in Texas.

As a precautionary measure, Bonitas fired off an email to their Australian target that revealed the Bonitas researchers had never visited Australia and they were sure the laws of the US would protect them should Rural Funds be so presumptuous as to try to defend itself.

Bonitas kept blazing away after the legal loss this week, suggesting the court judgment was “procedurally and substantively infirm”.

Meanwhile, Rural Funds’ share price — at $2.05 — has recovered to a point close to where it was the day Bonitas launched its attack.Hammerschlag will announce his decision on damages in the case on March 6. That decision won’t just be news in our market, it will be read by ever short-selling outfit around the world.

If the Rural Funds exercise ends up costing Bonitas big money in damages, it will change the numbers for anyone considering a short attack on Australian companies. Or, to be precise it will change how shorters behave in our market — and that would be no bad thing.


If there is a large damages payout against Bonitas, in some ways it won't matter if they thumb their nose at the ruling (something they give every indication of doing).
What it will do will give some others the gumption to take the shorters on.
I am seriously thinking of buying into some of these shorted stocks to bet on a rebound.
Mick



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mullokintyre
post Posted: Feb 13 2020, 04:58 PM
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From Todays Australian


QUOTE
A NSW Supreme Court judge has slammed the “materially misleading” and “deceptive” reports of a US-based short seller criticising the ASX-listed Rural Funds Group, in a move set to shake up the way high-profile shorts target the market.

In a landmark move, Rural Funds took the Texas-based Bonitas Research to court after a short-sell report authored by the research firm’s founder Matthew Wiechert called the stock “worthless”.

When the report was released on August 6, it triggered a 42 per cent drop in Rural Funds shares and has since kept trade in the company well below its pre-report levels.

In a decision presented to the NSW Supreme Court on Wednesday, Justice David Hammerschlag was scathing in his assessment of the hedge fund and Mr Wiechert, saying their comments were “false in material particulars and materially misleading”.

He found they had breached several sections of the corporations act and the ASIC Act, including engaging in deceptive conduct, and set a date of March 6 to consider the assessment of damages.

“Wiechert is no doubt a sophisticated operator. Yet, as earlier has been said, neither Bonitas nor Wiechert took the trouble to check with or inquire of [Rural Funds management] as to any of the matters which they broadcast. They had an obvious commercial interest in depressing the price. I have no difficulty in concluding that they did not care whether what they were saying was false,” Justice Hammerschlag said.

Mr Wiechert was formerly with Glaucus Research, best known for its take-down of Blue Sky Alternative Investments.

He put up a defence that as a business operating outside of Australia Bonitas was beyond local regulatory scrutiny.

In an email to Rural Funds lawyers in October, and noted in the court’s judgment as conveying the defendant’s “attitude”, Mr Wiechert had cited his constitutional right to free speech and Texan laws.

“We are not going to spend much time familiarising you with the laws of the United States as we assume you reviewed those laws before deciding to commence an action in Australia against an entity and person who do not do business there, and never been physically present there,” he wrote.

“… We will contest the enforcement of any orders or judgments you obtain that certainly will be contrary to the discoverable facts, as well as United States and Texas law and policy.”

Those defences were sharply criticised by the judge, who affirmed that the proceedings were governed by Australian law, as they were capable of being accessed in Australia and remained accessible by Australians.

“I am not qualified to express any view on the operation of the Constitution of the United States of America, or on Texas law and policy, and I do not do so.

“They play no role in the adjudication of these proceedings, which are governed by the laws of Australia.”

His judgment highlighted the dissemination of the report via Twitter and on the research firm’s website as well as through its subscriber channels, finding that Australia was indeed an intended destination for the statements. Investor Peter Davidson, head of Pendal Group’s listed property arm, said the judgment was an “unequivocal” validation of what Rural Funds had been saying all along.

“The judgment calls into question the behaviour of Bonitas and Mr Wiechert and a clear call for review and action by ASIC into this whole affair,” he said.

“My issue as an investor is people making false assertions externally and profiting from those assertions by entering into short transactions in Australia.”

The Australian market is no stranger to predatory short sellers from overseas. Hong Kong-based Bucephalus also took aim at Rural Funds in the months after the initial report, expressing similar claims to Bonitas.

In fact, Bonitas used the second report as validation of its own claims as it threatened Rural Funds with a defamation suit in the US.

Other notable short attacks include tech darling WiseTech, which took a 20 per cent hit to its market value after US-based J Capital accused it of overstating its profits last October.


It will be interesting to see how any judgments are acted upon.
The US firm may well just thumb its nose at the judgement and do nothing.

Mick




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blacksheep
post Posted: Nov 23 2019, 07:56 PM
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Return of short-selling bans: market protection or 'war against truth'?
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NEW YORK/LONDON/ISTANBUL (Reuters) - New moves to curb short-selling in some countries have set the stage for a renewed battle between free market advocates and authorities aiming to check investors they see as profiteers who destabilize major companies.

Turkey’s regulator banned short-selling of seven domestic banks last month after U.S. prosecutors charged state lender Halkbank (HALKB.IS) with Iranian sanctions violations.

South Korea is considering restrictions while European authorities are investigating short-sellers over alleged market manipulation - part of a nascent trend that Carson Block, founder of U.S. short-seller Muddy Waters Capital LLC, decried to Reuters as a “global war against truth.”

Meanwhile, as Brexit looms, authorities in Frankfurt, Rome and Amsterdam could temporarily curb short-selling of companies to counter price swings triggered by the European divorce, officials have told Reuters.


read more - https://www.reuters.com/article/us-global-m...h-idUSKBN1XT1L3



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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
nipper
post Posted: Nov 15 2019, 07:18 PM
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A fund manager's view on shorting
https://www.firstlinks.com.au/article/short...0ad48a-83781601
QUOTE
Shorting deserves more respect




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
blacksheep
post Posted: Nov 1 2019, 02:16 PM
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In Reply To: blacksheep's post @ Oct 29 2019, 08:28 PM

Good to see
ShortMan @shortmancomau
Oct 30

QUOTE
After some discussion with the ASX, I have now reinstated all the Alerts and Most Recent Short Sales - however I have had to remove the prices from the stock charts and the volumes from the tabled data. Thanks for your comments and support.




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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington

Said 'Thanks' for this post: joules mm1  myshares  
 
blacksheep
post Posted: Oct 29 2019, 08:28 PM
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Shortman Top 100

I was wondering why Shortman is no longer showing daily short sales, including notable alerts, on their website. Seems they have had a "cease and desist notice" letter from ASIC. This information was very useful - especially the notable alters.

ASIC provide a separate report on their website - but not nearly as informative or user friendly - you have to scroll through some 27 pages https://asic.gov.au/Reports/Daily/2019/10/R...AggShortPos.pdf

https://asic.gov.au/regulatory-resources/ma...-reports-table/

QUOTE
Unfortunately I have had to remove all Alerts and Most Recent Short Sales data from the site permanently. The graphed short statistics will remain, and they will still be updated with ASIC data daily. Apologies for the inconvenience.

1:35 AM - 24 Oct 2019


QUOTE
ShortMan@shortmancomau
Oct 25

Cease and desist notice




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The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 

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blacksheep
post Posted: Oct 26 2019, 01:05 PM
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In Reply To: blacksheep's post @ Oct 23 2019, 03:24 PM

Interesting interview with the woman at the centre of the WiseTech maelstrom - Anne Stevenson-Yang
https://www.afr.com/markets/equity-markets/...20191023-p533em



--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington
 
joules mm1
post Posted: Oct 23 2019, 07:37 PM
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In Reply To: blacksheep's post @ Oct 23 2019, 07:09 PM

thanks



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. . . . . . . . everything has an art.....in the instance of the auction process, the only thing, needed to be listened to; price
 
blacksheep
post Posted: Oct 23 2019, 07:09 PM
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In Reply To: joules mm1's post @ Oct 23 2019, 05:44 PM

The short sellers that Shapiro is talking about, and the ones I'm interested in, are the "activist short sellers - they are the ones who try to hunt down companies with weak or even fraudulent business models, bet against them and then expose them. If there were indeed "healthy markets" and no fraud you wouldn't have these guys shorting biggrin.gif

One of the most famous activist shorters is Jim Chanos who uncovered the massive Enron fraud. Chanos has been quite active shortingTESLA, but has been nursing losses on that bet.

Another high profile activist shorter is Carson Block (Muddy Waters) who spotted Bernie Madoff’s fraudulent activity well before his downfall

In Australia in recent years we've had QIN exposed, also BLA - both gone into receivership. SYR was attacked by Viceroy research when it was $7 - they put 70c on it - today the stock is 39.5c. More recently attacks on RFF and WTC. WTC is still ongoing with rebuttals back and forth.









--------------------
The herd instinct among forecasters makes sheep look like independent thinkers. Edgar Fiedler

If the freedom of speech is taken away then dumb and silent we may be led, like sheep to the slaughter. George Washington

Said 'Thanks' for this post: joules mm1  early birds  
 
plastic
post Posted: Oct 23 2019, 05:56 PM
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How's LCT working out for you? lol



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