19 November 2019
Local short-seller Anonymous Analytics said rival Gotham’s report on AAC Technologies is grossly misleading. Photo:Twitter
Local short-seller Anonymous Analytics said rival Gotham’s report on AAC Technologies is grossly misleading. Photo:Twitter

War of words between two short-sellers: What is going on?

Anonymous Analytics released a 51-page report attacking short-seller Gotham City Research over the latter’s report on Apple supplier AAC Technologies Holdings Inc. (02018.HK).

Short-sellers are considered part of the New Media, which may offer some insights for traditional media outlets which are struggling to transform their business model.

In its report, Anonymous Analytics, which claims links with the global hacker-activist group Anonymous, said: “This time last year we started hearing rumors of AAC using undisclosed related parties to hide costs.

“Hundreds of hours were spent pulling numerous [State Administration for Industry and Commerce] filings, conducting on-the-ground due diligence, and talking to dozens of former employees and industry sources,” it said.

“Another source told us they were also aware of the AAC short thesis but, after conducting their own research, came away ‘rather impressed’ with AAC.

“We suspect that a number of Hong Kong short-sellers had previously been informed of the AAC thesis, but none of them published it because none of them found the arguments convincing,” it added.

Anonymous Analytics said Gotham’s short report on AAC “is grossly misleading, and contains shoddy research as well as demonstrably false statements”.

It said Gotham’s report would undermine the credibility of short-sellers. “When one of us is this wrong, we all end up paying the price,” it said.

The media industry is pretty much in a similar situation. Media outlets often receive information from whistleblowers: some are just rumors, while others are falsehoods being spread deliberately.

A responsible media organization will verify such information and then decide what to do.

Sometimes they spend a lot of of time and effort in trying to verify such “big news”, but there may be no story in the end because they lack solid facts.

Meanwhile, another media establishment gets the same information and publishes it without proper checking and evidence.

The story makes a big splash, but readers soon find out that it’s just a rumor. Such behavior will harm the credibility of all media outlets, of the industry as a whole.

The emerging short-seller industry is becoming like the media sector. Short-sellers hire professionals to dig up hidden secrets of companies. 

They conduct on-site investigation and talk to a wide variety of relevant parties in order to ferret out the truth.

That’s exactly what investigative reporters are doing in trying to uncover shenanigans and scandals.

The key difference is that short-sellers do it for money. They look for a target, dig up dirt against that company, and openly attack it in order to profit from short-selling.

This article appeared in the Hong Kong Economic Journal on June 7

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist