Julie Steinberg. (17 Mar 2016). Short Seller Wages War in Hong Kong. The Wall Street Journal. (Purchased in Thailand).
The Hong Kong Securities and Futures Commission had been coming after Citron Research’s Andrew Left. It is a historical precedent. Left suggested that several corporate entities like Valeant Pharmaceuticals International Inc. and Evergrande Real Estate Group Ltd had issues which would lead to falling share values (i.e. shorting their stocks). Left has been short selling for 15 years. He claims to be self funded.
A negative outcome for Left would belong to one of three categories. He may be adjudged as misrepresenting information; lying; ‘reckless or negligent’. Resultantly, he could have to cough up his earnings or be prohibited from the Hong Kong market in future. (His profit in the case of Evergrande was HK$ 1.7 million. He traded off 4.1 million Evergrande shares before his damaging report and then re-purchased them at a lower price evidently.) His lawyers were present in place of Left at the legal proceeding as he was afraid for his well-being (from potential attacks ostensibly).
The article ends with a quote from Hong Kong shareholder activist, David Webb:
“There’s never been a case against a long buyer who’s been overly optimistic about a company’s prospects.”
Ironic tones indeed…