Wolff,
I may be a little slow, but I must compliment you on an excellent post.
It is clear in their story that they were aware that people (what he calls bashers) were warning people about the state of the stock. He was aware of the critical views concerning his investment.
Actually, this is something that many Shorters do out of respect for longs. When they short a stock, at the same time they go to the message board and say they are short, or they tell people why they believe the stock is short. Doing this at the time of the Short, is not of any benefit to the Shorter. It won't change much of anything, other that give notice to some longs that may be entrenched in the hype. If people sell, it will limit the amount of shares that can be shorted.
Amen. About a year ago, I held a too-large opinion in an overhyped, overvalued stock. I made a ton of money as the stock went form $1.20 to the $30s and then into the $40s. I did have a few concerns about the valuation, and I watched the company like a hawk, but I didn't sell because I believed in the concept and the people (whom I knew). I was probably the company's biggest booster on the message boards.
The a year ago, almost to the day, a shorter (on Yahoo of all places) posted some stuff from an SEC filing that didn't sound right to me based on everything I had read - from SEC filings.
I did a weekend's worth of panicked, deep due diligence, comparing one SEC filing to the next and identifying consistencies and discrepancies, and ... whaddya know, the proxy statement showed the executives had given themselves options for about a third ownership of the company, just before the stock price ran from $2 to $45. Which would have been a perfectly legal theft, except they neglected to mention this fact in several subsequent SEC filings, until after the stock had crashed. There's a law against insiders self-dealing themselves shares without informing shareholders promptly, I remembered it well from the warnings given in my business school law class - it's called rule 10(b)5.
The shorter didn't see most of what the thieves did - in fact he had only the tip of the iceberg. But he posted some facts from an SEC filing that I knew were at odds with "facts" I recalled from prior SEC filings. When I figured it all out I couldn't get out fast enough. I took incredible heat from other board posters for selling at $17. That was about a year ago (I still read that board once in a while, and amazingly enough I'm still getting heat there). Last I looked at the stock, it was trading under $3. Boy was I stupid to sell at $17 when I could have held it to $3.
I will forever owe a debt to an unknown shorter I know only by his Yahoo moniker of Bengalus. And to my own willingness to entertain his or her counter argument to what I believed to be the truth. The combination saved me about 2/3 of my current net worth.
I came across this thread, and A@P, as I started to research the short side after learning the expensive lesson and not selling at $45. I don't always condone the style of many short posters, but I have come to realize that they are no less valid or stylistically acceptable than the hype posted by many longs. One must look past the "buy buy buy" and "sell sell sell" messages. I now have a deep respect for alternative points of view to my own, short or long.
Shorts whose opinions I respect (A@P being at the top of this list, based on careful research over a period of time) are a source of leads. There is never a substitute for due diligence. There is never a shortage of leads on the long side, but the market needs the balance of the counter argument.
I applaud the many posters who, often at great risk to themselves, post the warnings that I know saved me from losing my shirt. Many of them have huge egos (in fact they seem to mostly hate each other). I can understand the ego thing, however, because I see so many people have thanked them for saving them so much money. I'd have as big an ego too if I could do that for so many people.
I could have bashed my short friend Bengalus, who was as far as I know a fly-by-night who never posted on another stock. Maybe he was an insider with a grudge, maybe just someone who didn't like the company after researching it, maybe someone who had stumbled on a fraud. But rather than bash him, as many did, I researched what he said and found he was right. More than right, in fact.
Those who bash A@P, Pluvia, Truthseeker, Mr. Pink, Bear Down, Mama Bear, eims2000, peter michaelson, and the many other acknowledged shortsellers on this board and elsewhere would be well served to ask themselves the question, what if they're right and I'm wrong. It might save you a ton of money, as one short basher did for me.
You don't have to agree with their style, you only need to seriously consider the possibility that they might be right and you might be wrong.
By the way, Bengalus didn't just save me money. The fraud he helped to expose forced the company to reprice those options, which are now so under water as to be worthless. Without that, the $3 stock would now be worth $2 - the options would have been exercisable at $2 and change, and would have been long since exercised - and the executives living out their lives in Brazil, most likely.
All my opinion, of course, but I will never, ever again bash an informed opinion, whether short or long, and whether rationally or irrationaly stated, until I've done my own DD. In the meantime I'll give preference to posters who post stuff that turns out to be accurate.
That's why this thread is the one I always read first.
Fund |
