The Dark Money Secretly Bankrolling Activist Short-Sellers — and the Insiders Trying to Expose It
Institutional Investor, 30 November 2020
More than a dozen short-sellers interviewed by Institutional Investor in an effort to penetrate this murky terrain say there are numerous players and various permutations of the model that may involve the sharing of ideas and research along with either a cut of the gains on the short trade or a set fee. In fact, some short-sellers believe that almost all of the activists have such backing — even those running small hedge funds themselves.
Short-sellers need more transparency, says former SEC commissioner
Ben Ashwell, Corporate Secretary, 26 June 2020
Robert Jackson discusses short-selling, fraud and the role of the commission
Former SEC commissioner Robert Jackson says he is troubled by the ‘increasing evidence of manipulation through short-selling’, and calls on his former colleagues at the SEC to consider a proposal for greater transparency for short-sellers.
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Burford Capital loses fight to force London Stock Exchange to hand over confidential trading data
Global Legal Post, 15 May 2020
Litigation funder Burford Capital has conceded defeat in an unprecedented battle with the London Stock Exchange (LSE) after the High Court rejected its application for the LSE to hand over confidential trading information.
Burford was seeking the identities of market participants trading in its shares in a bid to prove that its share price had been illegally manipulated during a sell-off that occurred after a heavily critical research report by hedge fund Muddy Waters last August.
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Burford abandons market manipulation claim
Gazette reporter, 15 May 2020
Burford Capital has abandoned a legal bid to prove its share price was illegally manipulated after being denied access to market information.
The embattled litigation funder said it does not intend to appeal a High Court ruling refusing an application to compel the London Stock Exchange to release trading data.
Burford has made a concerted effort to pursue claims for market manipulation following an August 2019 short attack against its shares. The Guernsey-registered and New York-based business came under assault when a US shareholder activist, Muddy Waters, published an apparently damning analysis. Muddy Waters claimed Burford was ‘arguably insolvent’ and described its governance as ‘laughter-inducing’, allegations which were strenuously denied by Burford. Muddy Waters renewed its attack on Burford earlier this week, accusing it of over-stating profits. Continue reading “Article: Burford abandons market manipulation claim”
Joshua Mitts, Ph.D is an Associate Professor of Law at Columbia Law School. Joshua Mitts, who joined the faculty in 2017, uses advanced data science for his research on corporate and securities law. His primary focus is on information disclosure in capital markets, consumer financial protection, and related topics in law and finance. Mitts employs empirical methods, including statistical analysis and machine learning, for his research on short-selling, informed trading on cybersecurity breaches, information leakage and hedge-fund activism, insider trading on corporate disclosure, and information transmission in financial markets.
Continue reading “Academic: Joshua Mitts, Ph.D”
Short Selling and the New Market Manipulation
John C. Coffee, Jr. and Joshua Mitts, 18 March 2019
Stock market manipulation has been around since shortly after stock markets were invented. Everyone is familiar with the methodology in the standard “pump and dump” scheme: False rumors are circulated, the stock is bid up by the manipulators, supply might be constrained, and, once the public’s appetite is aroused, the stock is dumped by the manipulators.
But the internet has changed all that. No need exists today for the boiler shop or its battery of phones or even carefully assembled lists of suckers. All that one needs today is to put one’s message (written under a pseudonym) on a blog that features hot news about individual stocks. Of these sites, the best known and most watched is Seeking Alpha, whose “Short Ideas” column contains numerous posts recommending that specific stocks be shorted. Reversing the old pattern, the focus is no longer on touting stocks for an immediate rise, but rather on suggesting a dark downside. Once the professional media may have played a gatekeeper role, refusing to publish wild and unsubstantiated reports. But on the blogs, it is the Wild West today. Continue reading “Article: Short Selling and the New Market Manipulation”
ABSTRACT: Pseudonymous attacks on public companies are followed by stock price declines and sharp
reversals. These patterns are likely driven by manipulative stock options trading by
pseudonymous authors. Among 1,720 pseudonymous attacks on mid- and large-cap rms
from 2010-2017, I identify over $20.1 billion of mispricing. Reputation theory suggests these
reversals persist because pseudonymity allows manipulators to switch identities without ac-
countability. Stylometric analysis shows pseudonymous authors exploit the perception that
they are trustworthy, only to switch identities after losing credibility with the market.
PDF (81 Pages): Paper Mitts Short and Distort