Short Seller Muddy Waters Notches Another Win With Solutions 30
Short Seller Muddy Waters Notches Another Win With Solutions 30
(Bloomberg) -- Short seller Carson Block scored a fresh victory this week when a plunge in shares of Solutions 30 SE provided a favorable outcome for the negative bet placed by his firm Muddy Waters Capital LLC.
The win for Block is the latest in a series of high-profile successes stretching back over a decade, that has also included the likes of Chinese timber company Sino-Forest Corp., milk producer China Huishan Dairy Holdings Co. and Middle Eastern hospital operator NMC Health Plc.
Muddy Waters disclosed a short position in Solutions 30 in May 2019 and was vindicated on Monday after the European technology-services company said its auditor couldn’t sign off on its 2020 accounts, sending its shares plunging 71%. The subsequent closing of the position marks the end of a chapter in which Block supported allegations of wrongdoing, repeatedly denied by Solutions 30, made in an anonymous report in December.
A spokeswoman for Solutions 30 declined to comment on the views of Muddy Waters, while reiterating that an independent auditor said last month the allegations were unfounded.
Recent bets by Block have focused on U.S. stocks amid a flurry of special purpose acquisition companies (SPACs) in that market, compared with 2019 when his targets were scattered more broadly across the globe. But he’s looking elsewhere too.
“Europe is somewhere that we are always very interested in, because we’ve long viewed it as a hotbed of dysfunction,” Block said by phone. “The U.S. right now is our primary focus. With all the SPACs that have gone public and de-SPACed, there’s a lot here still to do.”
Here’s a round-up of Muddy Waters’ short calls since the start of 2020, according to reports published on the short seller’s website. Block declined to comment on whether he still holds short positions in the stocks below:
Lemonade (report on May 13, 2021)
Shares of internet-based insurer Lemonade Inc. have risen about 50% since Muddy Waters released a report this month, though they are still down 51% from their record high of Jan. 11. The stock was the best performing U.S. listing of 2020.
Muddy Waters published its report two days after Lemonade’s first-quarter earnings, questioning the company’s protection of customers’ personal information. In response, Lemonade said links to insurance quotes accessed by Muddy Waters were shared by users themselves, not a vulnerability, and that its quotes are designed to be shareable with family and friends.
Lemonade, which is based in New York, had no further comment when contacted by Bloomberg this week.
XL Fleet (report on March 3, 2021)
XL Fleet Corp., a maker of systems to reduce fuel consumption, has tumbled 57% since Muddy Waters issued its report, having gone public through a merger with a blank-check company in December that valued it at about $1 billion.
The short seller raised questions about XL’s sales and prospects as a player in the vehicle electrification sector, and cited a previous equity raise valuation of just $73 million, calling it a “far cry” from its SPAC valuation.
Boston-based XL, whose customers include The Coca-Cola Co. and Verizon Communications Inc., said this week it had no comment beyond an initial response that the Muddy Waters report contains “numerous factual inaccuracies, misleading statements, and flawed conclusions.”
Joyy (report on Nov. 18, 2020)
Joyy Inc., a Chinese live-streaming company that listed on Nasdaq in November 2012, has fallen 23% since Muddy Waters said it was short the stock.
The report was published days after Joyy agreed to sell its YY Live business to Baidu Inc. for $3.6 billion, a deal that was overshadowed when Muddy Waters called YY a “fraud tech company.” Joyy said in February that the sale is “substantially completed,” and a spokesman referred back to that statement when asked for further comment this week.
Joyy has said Muddy Waters doesn’t understand the way streaming services work in China, and that the short seller’s report was replete with errors. The Guangzhou-based company in February announced the departure of Chief Financial Officer Bing Jin to pursue a new job opportunity.
MultiPlan (report on Nov. 11, 2020)
Shares of MultiPlan Corp., which helps insurance companies find cost savings in health-care claims, are down 3% since Muddy Waters named the stock as a new short. Block’s firm said in November that MultiPlan could lose its biggest client, UnitedHealthcare. In response, MultiPlan Chief Executive Officer Mark Tabak said on a November earnings call that the claim was “absolutely false.”
MultiPlan, which merged with Michael Klein’s SPAC Churchill Capital Corp. III, said at the time it “categorically” rejects the assumptions in Muddy Waters’ “self-serving” report. The company declined to comment this week.
Nano-X Imaging (report on Sept. 22, 2020)
Nano-X Imaging Ltd. shares have fallen 13% since Muddy Waters issued a report on the startup founded by Israeli investor Ran Poliakine. Listed on Nasdaq in August, the company’s device uses semiconductors instead of metal filaments to generate X-rays.
Muddy Waters in September claimed Nano-X has “no real product to sell other than its stock,” following on the heels of a negative call by another short seller, Citron Research. In an emailed response this week, the company said it “certainly will not let the short report with false allegations stand in our way.”
GSX Techedu (report on May 18, 2020)
GSX Techedu Inc. is down 48% since Muddy Waters released a report on the provider of an online after-school tutoring service in China.
U.S.-listed Chinese education stocks have been hit more broadly of late after President Xi Jinping highlighted the need for tougher regulations on after-school education and tutoring institutions. GSX was part of the stock selloff that followed the collapse of Archegos Capital Management in March, and also tumbled this week after reporting first-quarter earnings.
In May last year, Muddy Waters questioned GSX’s user numbers. The Beijing-based company said the report contained confusing data sources and reflected a lack of understanding of the company’s business, and that it has disclosed financial data “accurately” and “completely.”
The company’s policy is to not comment on the share price or trading activity in the market, it said when contacted by Bloomberg this week.
EHealth (report on April 8, 2020)
EHealth Inc. shares have plunged 44% since Muddy Waters published a report on the company, which provides an online comparison tool for health insurance and Medicare plans. In April 2020, the short seller questioned the Mountain View, California-based company’s accounting.
EHealth said Monday that Chief Financial Officer Derek Yung will resign, effective June 11. It didn’t respond to requests for comment this week.
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