Muddy Waters Research

From Wikipedia, the free encyclopedia
Jump to navigation Jump to search
Muddy Waters Research group
Privately Held
IndustryInvestment management
HeadquartersCalifornia, United States
Key people
Carson Block
Number of employees
1-10
Websitehttp://www.muddywatersresearch.com

Muddy Waters Research LLC is a privately held due diligence based investment firm that conducts investigative research on public companies while also taking investment positions that reflect their research.[1] The firm has exposed accounting problems and fraud at several companies, primarily in China but also in other countries in Asia, Europe and North America.[2]

The firm is best known for spotting fraud at Sino-Forest Corp, a Canadian-listed Chinese company whose stock fell 74 percent before it eventually filed for bankruptcy protection in March 2012.[1] In 2014, Canadian authorities outlined criminal fraud charges against Sino-Forest and its executives.[3] Prominent investors including Maurice Greenberg and John Paulson lost significant amounts of money on Sino-Forest.[4]

History[edit]

Muddy Waters was founded by Carson Block, an American short-seller.[5] The company is named after the Chinese proverb “ 混水摸魚 ” "muddy waters makes it easy to catch fish."[6] In January 2015, the firm raised an initial $100 million for its investment strategy.[1] Block has been described by Bloomberg News and others as "one of the most successful bears" in the market today.[7]

In 2011, Block was named as one of the 50 most influential people in finance and investing by Bloomberg Markets Magazine.[8] Before founding Muddy Waters, Block ran a Shanghai-based self-storage company called "Love Box Storage." He also wrote the book "Doing Business in China for Dummies," was an attorney at Jones Day in Shanghai and an adjunct professor at Chicago-Kent College of Law.[9]

In addition to Sino-Forest, Muddy Waters also reported on NQ Mobile, a Chinese-based cybersecurity and mobile application company. In October 2013, Muddy Waters published research claiming NQ Mobile had "fictitious" customers and revenues. In April 2015, the co-CEO of NQ Mobile, Omar Khan, stepped down after the stock had fallen nearly 84 percent.[10] He has also released reports on companies including Noble Group, Focus Media, Olam International, Groupo Casino, Orient Paper, China Media Express, Bank of the Ozarks, Rino International, Bolloré, American Tower Corp. and TeliaSonera.[11]

In April 2016 Muddy Waters turned against German MDAX listed company Ströer SE & Co. KGaA. Among other things Muddy Waters accused Germany's biggest advertising company of violation of IFRS-accounting directives and claiming that digital organic growth rates presented by the company were faulty, [12] resulting in a loss of its stocks by 25%, with prices falling from €52 to just under €35 within 45 minutes of a TV presentation by Muddy Waters on the company. Shortly after German Federal Financial Supervisory Authority inquired the case suspecting overstepping of ethical and legal lines by Muddy Waters Capital. One aspect dealt with Muddy Waters failing to report the build up of a short-position exceeding 0,5% of stocks in due time. According to German financial law this notice has to be given at least one day after creating a short-position within that limit. According to public prosecution office Muddy Waters has overstepped that time period by five days. Since June 2017 public prosecution department of Frankfurt am Main investigates the case with respect to alleged market manipulation by Muddy Waters in the case of Ströer.[13]

In August 2016, Muddy Waters released a report claiming that pacemakers and other implantable medical devices made by St. Jude Medical were highly vulnerable to hacking.[14] St. Jude Medical denied the claims made by Muddy Waters, stating that they were "false and misleading" and sued the firm for defamation.[15] In January 2017, the U.S. Food & Drug Administration and the Department of Homeland Security released the results of an investigation into St. Jude's cybersecurity vulnerabilities, which confirmed the findings of Muddy Waters.[16]

On his process for finding wrongdoing at companies, Block has been quoted saying "It's a bit like solving a puzzle. You're really trying to find the pieces and how they match together to make a clear picture of just what the company is doing."[17]

Block appears frequently as a commentator on Bloomberg Television, CNBC and the BBC. He has written op-eds in the Wall Street Journal, Financial Times, and The New York Times on various topics related to improving corporate governance and market transparency.[18][19][20]

On June 29, 2017, Muddy Waters opened research into Prothena Corp PLC, a biotech company whose leading product the shortseller claimed was commercially unviable.[21]

See also[edit]

References[edit]

  1. ^ a b c "Short-seller Carson Block launches hedge fund". Reuters. 2016-01-25. Retrieved 2016-08-13.
  2. ^ "Profile".
  3. ^ Dummett, Ben (2014-09-02). "Canada Regulator Lays Out Fraud Case Against Sino-Forest". Wall Street Journal. ISSN 0099-9660. Retrieved 2016-08-13.
  4. ^ Anderlini, Jamil (2012-03-20). "New kid on the block". Financial Times. ISSN 0307-1766. Retrieved 2016-08-22.
  5. ^ https://dealbook.nytimes.com/2014/09/10/short-seller-carson-block-says-hes-wary-of-alibaba/
  6. ^ "About us".
  7. ^ Xie, Ye; Korby, Boris. "Carson Block's Once-Perfect Short-Sale Resume Loses Luster". Bloomberg.com. Retrieved 2016-08-17.
  8. ^ "Bloomberg Markets Most Influential 50". Bloomberg.com. Retrieved 2016-08-17.
  9. ^ "Special report: The". Reuters. 2011-08-05. Retrieved 2016-08-17.
  10. ^ "Carson Block sounds like he's having a great day since the co-CEO of one of his short targets stepped down". Retrieved 2016-08-22.
  11. ^ "Research | Muddy Waters Research". www.muddywatersresearch.com. Retrieved 2016-08-23.
  12. ^ www.muddywatersresearch.com | Muddy Waters Research http://www.muddywatersresearch.com/research/sax/mw-is-short-stroeer | Muddy Waters Research Check |url= value (help). Retrieved 2017-12-06. Missing or empty |title= (help)
  13. ^ www.capital.de/ | Capital https://www.capital.de/geld-versicherungen/leerverkaufsattacke-auf-stroeer-wird-fall-fuer-staatsanwaelte | Capital Check |url= value (help). Retrieved 2017-12-06. Missing or empty |title= (help)
  14. ^ Washington, Richard (2016-08-25). "St. Jude Medical drops after Muddy Water findings of 'negligent product design'". CNBC. Retrieved 2017-04-11.
  15. ^ "St. Jude Medical Files Lawsuit Against Muddy Waters". Bloomberg.com. 2016-09-07. Retrieved 2017-04-11.
  16. ^ "St. Jude admits security vulnerabilities in cardiac devices". Healthcare IT News. 2017-01-10. Retrieved 2017-04-11.
  17. ^ "Here's how famous short seller Carson Block picks a takedown target". Retrieved 2016-08-17.
  18. ^ "Carson Block: The Man Behind Muddy Waters". Retrieved 2016-08-17.
  19. ^ Block, Carson C. (2012-05-03). "China's Auditing Train Wreck". Wall Street Journal. ISSN 0099-9660. Retrieved 2016-08-18.
  20. ^ Block, Carson (2014-03-06). "Beware the false reassurance of corporate probes". Financial Times. ISSN 0307-1766. Retrieved 2016-08-18.
  21. ^ "Muddy Waters Is Short Prothena Corporation PLC (PRTA)". ValueWalk. 2017-06-29. Retrieved 2017-06-30.

External links[edit]