When people suggest that short sellers don’t have a role in the stock market, point them to this story or any of the other stories that Hindenburg, Muddy Waters or any of the other short sellers have uncovered over the years. The fact is with so many companies around the world, incredibly bad behaviour or bad actors can be missed for a long time. It often takes a short seller to uncover it.
In this case, the first dot point of Hindenburg’s paper really tells the story, “Singularity’s CEO, Yang Jie, is a fugitive on the run from Chinese authorities for running an alleged $300 million Ponzi scheme that lured in over 20,000 victims.”
Yang Jie fled to America while at least 28 other people involved in the scheme were sent to prison in China. And Yang Jie has been hiding in plain sight – taking the helm of NASDAQ-listed, Chinese focused logistics company, Singularity.
Since taking over the company, Yang Jie has pivoted the company into cryptocurrencies. Singularity has announced a $200 million deal with SOS Limited (another company Hindenburg has investigated and written a report on – after which their share price fell 90%). Since Hindenburg released this report on Singularity on Thursday, the share price has fallen 37%.
It’s not tough to imagine why. Here’s one of Hindenburg’s concluding points, “We think Singularity is an extremely obvious total scam, with little to no actual business operations. Given that CEO Yang Jie helped usher in the implosion of another NASDAQ-listed company (China Commercial Credit), along with a massive Ponzi scheme in China, we expect he will continue until he is stopped.”
These wild stories hide in plain sight, in the most scrutinised stock market in the world in the full view of the market operator and market regulators. This is why short sellers play such an important role in markets, even if they can occasional get things wrong.
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