Andrew left is the subject of a Bloomberg profile today that chronicles
his current life a bitter limbo as he awaits the outcomes of probes by the
U.S. Justice Department and the SCC.
Pleased to say Andrew Luck joins us right now to talk a little bit more
really about the whole short selling ecosystem.
Andrew, That I don't know, just seems to have gone away over the last three or
four years or so. And I'm wondering, is that because of
the regulatory scrutiny or is that more because of the public pushback from some
of the retail traders? First of all, my life's not in limbo.
I see that it's kind of scary to even read.
I'm healthy. I'm doing just fine, you know,
professionally. If Citron Research is not thriving the
way it used to. By no means that everything my life is
in limbo. Just when you see that in your own name,
it's kind of scary. As for the short selling, it's thriving
right now. You know, recently, Hindenburg.
Nate Anderson is on a wonderful job. He did stories on Icahn and he did the
bigger daddy. So that's doing just fine for me
personally. It changed how I wanted to how I chose
to run. CITRON But I think activist short
selling is become very mainstream right now.
When I started the industry 23 years ago, it was quite unique.
And right now, if you don't have an opinion on a stock, you don't publish
your opinion. That's even more unique.
So it's a good place right now. It's.
Well, yes. And I mean I mean, you are basically a
pioneer in this space, but it's the horse, the road less traveled.
It is a much harder way to make a buck, at least in terms of the scrutiny, the
lawsuits and all of the other things that come along with being a contrarian,
the ultimate contrarian, if you will. I am curious about what, you know, if
anything, about these investigations. What exactly is the government looking
into? I don't know.
I don't know what the government is looking into.
I assume years ago when the investigation started, six or seven
years ago, I don't even know when it started.
But we're in a different environment than we have right now.
You know, when you see 100 million people set up two threads in a week, it
shows you people want their opinions heard and not just their opinions on
what restaurant or or what outfit they might wear, but on stocks.
So everyone is expressing their stock opinion right now.
So the activists are just people who basically just do extra homework and
express their opinion. I don't know what its exact
investigation is about, but it has to do with short selling and activist short
sellers. Obviously, Inter definitely want to get
to social media, but on that topic of what these investigations could be
about. Have you had any communication with
investigators at this point? I'm not in a communication.
I have not. Okay.
No communication with the investigators. What about other short sellers
potentially under the lens here? I mean, I can't speak for other short
sellers, so, you know, I don't know. But if people think there's just like
underground network of short sellers who try to ruin companies or anything like
that, it doesn't work like that. You know, it might be a cute thought,
but no short selling. If you read any of the reports of the
people I know from Citron, if you read The Muddy Waters, you read the
Hindenburg's, the Group of People. Well, there's a lot of thought and
detail that goes into the work. People should look at exactly the short
sellers, and they do now. I think the market takes that short
selling a lot more serious. When a good short sale report comes out,
there's a lot more of a market reaction than the sell side research report,
which is why I'd be pumping a stock up to maybe do a secondary or to help out
with the company. So I think is there has there been some
shoddy work in the short selling? Of course there's some shoddy work in
any industry, but there's been a lot of great work.
Talk to us about, I guess, what the future ends up being, Andrew, because we
talk about in the industry. Alisa When we talk about dedicated
shorts here, I mean we're really only talking about a few dozen of funds out
there that are dedicated to that. And if you throw in sort of some of the
long short with the short bias funds, it's still a small fraction of the total
industry. I think retail traders are becoming more
short. Also, you know, you can't discount the
effect of the retail trader. They've seen, you know, when all the
specs fell apart, when they saw what was going on at the end of 2021.
And at the end of it, you know, there was a lot of opportunity on the shorts.
So the retail traders took advantage of short selling.
Used to be known specifically for the professionals and the hedge funds.
But the market has become a lot more democratized, partially because of the
short selling and now even retail traders, short stocks.
But when you talk about an individual retail trader to probably pull off a
short in the way that maybe you can't draw primarily because of the difference
in scale, basically they can do it in a way that allows them to be a little bit
more in the shadows when you're going the traditional route, meaning you
basically buy in the shares and then selling them off and then buying them
back at any sort of scale. You're going to attract a lot of
attention. Can you do that at scale?
Can someone like you or one of your peers in that same group, can you still
do that? Yeah, it's being done.
I mean, right now, if you get the information, as they said, you know,
this year, Nate Anderson over at Hindenburg's had a hot hand and he's
done it at scale. And it can be more opportunities a lot
more. I have no doubt about that.
Yeah, it still can be done at scale. Well, I want to talk a little bit about
the opportunity set, because there's some data that we have from Breakout
Point which says that the number of major new campaigns by activist short
sellers actually dropped last year by about 16% to 113.
And when you look at the universe of potential targets here, has that gotten
smaller? It has because the market's becoming
self-regulated, which is a very good thing.
If you look at Twitter, the amount of people who are on and engage on a daily
basis, it allows for stocks maybe not to get so carried away.
That is a good thing. So the information on the Internet is a
good thing. So maybe that's why campaigns are 16%.
I wouldn't call that statistically significant how they would consider it,
because the market itself is is lower in some areas.
So there's not that much of a change. And I think also the bar is being
raised. I mean, I look at some of the earlier
Citron reports, there were two or three pages long.
Just laying out a simple thesis. And right now, if you want to put out a
good short report, you have to really be strong.
I want to talk a little bit about social media.
You brought up Twitter. Of course, you've deleted your tweets.
I have a two parter here. Would you ever go back to Twitter or
another platform in looking at the industry in general, do you think that
we might see more activist short sellers kind of going underground here?
I just deleted my Twitter one day and it's going are so filled with hate and
meanness. And maybe I just as I got older, I just
didn't have that in my belly anymore. And it's I don't know, you know, I
realize it's foolish. One day I didn't realize deleting your
Twitter was such a big deal. It's like breaking up with the world on
Instagram or something. I didn't know it was like such a, you
know, only till I did it enough to work. I'm getting called.
Is it? Something crazy happened.
I just wandered away from social media. I'll go back to Twitter, of course.
I just don't want to hit every single person who's involved in any single
stock I've ever tweeted or written about have to reach out to me.
I think on their nemesis for the past 20 years, it's too much of a burden to
carry for me at the time. I don't want to do it at that day.
So, you know, everything's changed things.
Obviously, I look at Twitter, it's I think it's a mean platform of people act
People act different when they're anonymous.
Yeah. What's been interesting about activist
short selling is that's one of the first people that came out there like 20 some
odd years ago and said, here I am, here's my name.
I'm not hiding behind anything. Here's what you're is all about.
So now. Yeah.
Are you are you still actually active in the markets right now?
Either short or long? Oh, yeah.
I'm act as an active. Yeah.
I might have short and I'm active as long.
Of course, I've always been, you know, people say short seller, I've always
been long as well. I've just been known for writing
activist, short selling newsletters, just, you know, buy stock.
I'd be foolish not to. Yeah, absolutely.
But I mean, we talk about sort of the, I guess, the overlay of social media and
and to a certain extent, I would think that would actually a major job somewhat
easier. I mean, when you started this, I mean,
the only way to kind of get the word out, you had to have that network of
people or go on a major television network or something to get the word
out. And social media, in a way, led to that
democratization that I think you were just talking about a little while ago
with the retail set, the 100%. You know, the sad part is the attention
span has gone down. I always wondered what percentage of
reports actually get read. If you put out like a 20 page report,
you know, people really don't read as well.
But, you know, they don't read the major, you know, they read the headline
or they get the gist from a media report and then they try to trade after you.
I mean, there are people who do read it. And I mean and like you said, I mean,
there is valuable information in there. But we circle back, I guess, to I guess,
what investigators and what some of your critics are saying is they're they're
wondering how honest those reports are, whether there was any sort of
collaboration or cooperation with other short sellers.
That appears to be, I think, where some people are saying, okay, what really is
this report about if they're not honest? You know, it's funny, I just did the
Bloomberg radio and that's your cooperation.
The weird part about that question is, let's say I liked Apple and I called
them, said, you know, I love Apple, I love my phone, I love the product.
And what do you think? I agree.
And we both buy Apple. Are we inclusion?
No. So similarly, let's just say Valiant was
raising drug prices every day and their bike company raised drug prices.
So if I call another short seller, you know what?
How long could this company possibly buy new drugs, raise the pricing, and then
drop that the customer base pricing? Is that collusion?
No. So try to find the truth.
If you're trying to find the truth in the market, let's put collusion out of
the way. It's not artificially manipulating
prices any which way. The market is very thick that you can't
artificially Shutterstock down. It just doesn't work like that.
The market's too efficient right now. I mean, look, GameStop is still high.
If you look where it is, even adjusted for splits and other probably just
legacy holders who bought it afterwards, you're not selling.
There's a lot of buyers out there in the market.
So I think a short until like an artificially depressed, the stock is
completely wrong. No, the exception would be the banks.
I don't write on banks. And what was the effect of short selling
with the regional banks and could you? That's a whole nother story that I want
no part of.