Andrew Left, activist short seller and author/editor for Citron Research, recently concluded a hearing in China regarding his coverage of Evergrande, a Chinese property developer.
Evergrande trades OTC EGRNF and on the Hong Kong exchange (HKG: 3333), and has seen some significant market action, attributed in part to Left's commentaries, which has resulted in legal action against Left and Citron. Hong Kong's Securities and Futures Commission accused Left of "market misconduct," Bloomberg stated in late February.
A representative for the SFC was quoted in Bloomberg, telling the Market Misconduct Tribunal, "The Commission's case is that Mr. Left knew, or was reckless or negligent to whether that information was false or misleading as to material fact, or was false or misleading through the omission of a material fact."
Additional charges included "making about HK$1.7 million ($218,700) in profit after selling short 4.1 million shares of Evergrande just before the report's publication."
Back From China
On his return to the States, Left spoke with Bloomberg.
When asked to summarize the hearing, Left said, "So, we finished trial. And I think the attorneys are still up to put in some final arguments […] We will get a hearing back in August – results back in August."
"I'm hoping to just help Hong Kong progress and have a more open market. More dialogue, like we have in the US. Make it more transparent. And Hong Kong will become a better market for it."
"I expressed my opinions in my report. I thought they were fair and honest. And so we'll see what the tribunal says now."
Would He Do It Again?
When asked if he would undergo the associated stresses and costs with this endeavor if he could do it all again, Left stated that whole it has "not been a smart financial move," he sees the potential to make a real difference and bring about progress in foreign markets, particularly in regards to transparency, as incomparable.
He elaborated upon why being short was probably the cause of the controversy, but also the target of his report escalated the issue. "And this is where I probably should have thought twice. Evergrande is one of the largest property developers in China. So, it's probably not the best idea to write a short report on one of the largest property developers in China," he chuckled.
Other Shorts
Left ended his discussion with Bloomberg by providing an update on another name he's shorted, Mallinckrodt PLC MNK.
"What Mallinckrodt did by buying QuestCor was the biggest joke."
He explained that the way the company is handling business may be legal tax-wise, but from an insurance front, Left has doubts. "How they are marketing Acthar (a hormone-based drug with a sky-high price tag), I do not believe is legitimate on an insurance front."
Regarding being short, Left summarized, "It's the bane of my existence. You can sit around and be short for years, and everyone thinks you're crazy. And you're banging your head. And then one day, everyone's like, ‘My god! You really know what you're talking about!' So, yeah, that could happen one day with Mallinckrodt."
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