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I am Not a Ninja Assassin Who Brings Down Stocks

Stock-Markets / Stock Markets 2011 Jun 30, 2011 - 01:41 PM GMT

By: Bloomberg

Stock-Markets

Best Financial Markets Analysis ArticleCarson Block of Muddy Waters spoke to Bloomberg Television's Erik Schatzker about Sino-Forest earlier today. Block said he is still short Sino-Forest and that he isn't a "ninja assassin" who brings down stocks. He thinks of himself as someone who is "protecting investors."


Block on whether he's as certain today as he was on June 2nd that Sino-Forest is a fraud:

"Yes. Let me say two things. Number one, it is Sino-Forest's management that participated in the fraud that has cost Paulson and investors all that money. No. 2, yes, I'm just as certain today that the company is a fraud and the stock is zero as was on the day that we published."

On whether he's discovered anything else about Sino-Forest that supports his allegations: "We have continued to do work on it. We have looked at it closely from an accounting perspective. Some of the company's additional disclosures, in its attempt to defend itself against charges of fraud, some of those have actually been helpful in furthering our analysis. I am not sure to what extent we will make this public. We certainly do intend to communicate with both PwC, which is advising the special committee, and Ernst & Young and the regulators."

On whether he is still short the stock:

"Yes…We do not comment in specifics on the revenue model, but my personal money is on the short side of this, and has been with every short call that we have made."

On S&P downgrading Sino-Forest bonds because of Muddy Waters' research:

"I'd think that it's a bit of a cop out on the part of S&P. We published this almost a month ago. The company has had a microphone and a platform to respond. When it has opened its mouth, the company, the stocks and bonds have gone lower. Rather than having anything confidence inspiring to say, they have continued to spook investors. S&P may want to hang this on us, but I have a feeling that is really a cover for, at least in part, their own assessment that there are significant risks that are company specific not related to market perception and Muddy Waters."

On his Spreadtrum call and criticism he's received:

"I am getting uncomfortable, actually, with this idea that we are ninja assassins that are going to take this stock price down a huge percentage within minutes or days. What I would like to do to protect investors is that I would like to point out the issues and start a dialogue and get people thinking about these red flags before we come out with a report that sends the stock down 70%, 80%." "In the worst- case scenario, if Spreadtrum has fantastic answers and everything is the way it should be, and we misinterpreted these points as red flags, but the company transparency has improved, then the stock will go up."

On how he thinks of himself if he's not a ninja assassin:

"I think of myself as someone protecting investors. I have skill sets and experience that enables me to decode fraud in the China context and I am out there helping investors will stay away from these things before they throw more money at them."

On whether he is planning to hire any full-time employees:

"I think it's a mischaracterization to say that I am a one-man show. We do have a team. We operate differently than a traditional research house. I've got a network of people who consult for Muddy Waters. At present, the model works fine. I suppose if we wanted to do something different or ramp up, we would need to take on head count. It is really difficult to produce good, quality China research in volume. You see that the banks struggle with this."

bloomberg.com

Copyright © 2011 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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