YouSaid · the spoken record

Carson Block

lines on the record: 90
first: 2021-05-28
most recent: 2021-05-28
sittings or episodes: 1
sources: podcast

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“I've got a friend who is kind of in this space, pretty smart guy. And he said that the real value of any of these blockchain-based cryptocurrencies is the present value of the transaction fees or the, I think he calls them the gas fees for using it. Beyond that, he admitted, and he's got a real Bitcoin position. Beyond that, he admitted it's just a tulip. So I don't touch it. I don't care. I've seen fads and the next things come and go like a bunch of times during my career. And I've seen a lot of people who can't tell the difference between luck and skill because they happen to be in the right place at the right time. And crypto, Bitcoin smell that way to me.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Okay, so I mean the meme stocks just show that the market is broken and they are a symptom, not a cause of the market being broken. The factors that have broken the market are the predominance of passive investing that actually has a convex effect on price behavior and increases fragility. It's the ridiculously low interest rates and excess liquidity and it's also the erosion of the rule of law and the lack of accountability in the markets and in society. So these are factors that have combined to create this broken market. Plus there were a lot of retail market participants who came into the market last year who didn't do it out of Borden, didn't do it because they're punting their stimulus check. They did it because they were trying to gamble their way out from underneath.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, and it was tough. I mean, we really had to rally and we were getting ready to launch another fund. You know, I was in January. I was just marketing this new fund to be intended to launch in early to mid-Jan or early to mid-2020. And we sidelined it because of COVID. But by the time we're bleeding everywhere in the summer of last year, I was just like, man, do not talk to me about this new fund launch. I do not care. We are in a nosedive. We need to pull out of it.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then we were also now riding losses from GSX, which we'd shortened in early June. Now, we've done well shorting e-health in early April. So that was actually, that was and is a great short, both an absolute terms and an alpha. But there's GSX, and then we went into, I think, September with this really scammy company that normal times would have no business having a market cap anywhere near a billion, but called Nanox. And so we went short that with this expose as to how this whole thing is just a promotion and, you know, there's no reality there. Can the thing closed up on us on the day and it kept ripping? And so we're, you know, we're getting bled out on Nanox. We're getting bled out on GSX. Our genius trades had painful.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Couple decades. Haha, jokes on you. No, it wasn't. Joke was on me. I think we're the last to get the memo. It was like early August when I'm saying like, okay, all of these trades we put on at the end of February, beginning of March are genius trades, because we're so smart. We got to get these out of the book. They were hanging there till August. So we were getting back almost all our gains on that. Markets got back to”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I knew at the end of February when I saw the results of an EverCore survey of institutional clients, I was like, this is complacency. And so at the end of February, I said, guys, all these names we've looked at throughout the years that didn't make the cut for activist short selling, but we know our crap companies, let's short these things. Let's get CDS on cruise lines. Let's do this. Let's do that. And so we had this great march. We didn't even have to publish anything. And by the end of March, I think we were up net 11. And I'm thinking, man, this is going to be a record year for us. And we were so smug, right? At least I was. I'm sitting there going, yeah, you know, I've been doing all these interviews for all these years saying if you lever up your balance sheet to buy back stock, you are creating fragility. And now, haha, all this fragility is coming home to, you know, the chickens are coming home to roost. Look at you, private equity guys having destroyed corpses of companies for, you know.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Ridiculously low rate, so it anesthetized a risk. And we're looking at the China-Hong Kong markets going, ah, this thing can't be bad, right? Like those markets aren't off.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Into an equity bubble and pump up the equity bubble, but they didn't understand that those bubbles are harder to keep going because you've got daily mark to markets. And our marks to market. And anyway, but at that time they started throwing short sellers in prison or in jail temporarily. They got brokerage firms to go out and buy stocks. And I think they were pumping money into the government was pumping money directly into the market to keep it propped up to avoid the loss of wealth. But I felt like the same thing must have happened in February in China and Hong Kong because the government was trying to downplay they were trying to cover up any signal as to how serious COVID really was. So the rest of the world was kind of in this melee at the end of 2014 where we've been anesthetized by 11 years of”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Really hard. So we were early, I was personally very early in the toilet paper trade in COVID. I think it was like mid January, sorry, as late January when just stocked up on toilet paper and canned food and basically got ready to live in a bunker. It was at the end of February and markets in the US hadn't yet reacted. And also there's an interesting point here because by late February Hong Kong and mainland markets had largely recovered from their COVID dips. And we talk about the manipulation of the markets from China. China developed the IP to manipulate its markets back in 2015. It tried to, the government had tried to novate the housing bubble or the real estate bubble.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I really hated 2020. And I mean, part of it is, I definitely have a hard time separating my feelings about the external environment from my feelings about what was happening business-wise. Going back to a comment I made earlier about how I'm very good at absorbing other people's experience, I think I'm very sensitive to the environment around me, especially very, very sensitive to risk and trouble. And so 2020 was just a year of, I mean, it was emotionally overwhelming for me, just based on all the misery, you know, I felt like my heart was breaking some, you know, more and more every day. And on top of that, business was like really.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I didn't really change anything I was doing. But it wasn't that I followed the advice. It's just. That I felt I'm somebody who's very focused on process, and especially when it comes to making difficult decisions. And, you know, even if I don't change my mind, I always want to get more information and I want to get contrary perspectives because I understand my decision better and I understand the trade-offs better. And I just felt while Rich's advice didn't alter the outcomes, it improved the process and it helped me better understand why it is that I've chosen this as my path.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I really had to pause and consider that. And I did. I mean, look, maybe I told myself what I wanted to tell myself at the end of the day. I disagreed with his assessment, but I took it very seriously. And I even talked about it internally with, because at that time, my team consisted of some people who I considered close friends. I mean, it still does, but these were people who were friends first and then became team members. And so I also felt like they were good people to help me evaluate what Rich had said.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, and then again, he repeated his assertion that he thought I was addicted to the attention. So I walked out of there. Look, I mean, maybe a lot of people say this, but I think I really mean it. I very much appreciate when people speak to me directly and don't be BS me. I mean, assuming they have something valuable to say. And I recognize that I just had one of those moments where a very smart, sophisticated person who understands to a reasonable degree what I do was telling me that this was a bad life decision to continue in this business.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Man, you're crazy. And I don't mean that in the haha, you know, funny way. I mean, really, why are you doing this? I think you're addicted to the attention. You've got all these guys like Goldman Sachs and others with their knives out waiting to stab you in the back the moment that they can. You get death threats when you've got a young family at home. You get lawsuits. You're telling me you don't sleep well ever. Why are you doing this? Seriously. I mean, is this going to, at this point in your life, the kind of money you're making? How much are you making? Does that change your life? No, that doesn't change my life. Why do you do that?”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I set up a meeting with him and I really didn't know whether Japanese would be interested in doing the business because they had a big, they were building their investment banking franchise in Asia, but I figured, you know, look, why not, he took the meeting. So, you know, that's cool. And, you know, he knew a little bit by reputation, but he just started asking very direct questions like, okay, well, I mean, this is a stressful business, right? Like, you know, I mean, besides lawsuits, I mean, don't you get deaths here, I do? You do? I mean, you're married and you've got a kid at home? Yeah. And, you know, and he's just, you know, and I told him how, you know, like Goldman, you know, hated us and these other guys, you know, hated us. And he just said to me, he's like, he said, why do you do this?”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, exactly. Well, I mean, look, I even one time said to, you know, I had an account at a private bank that I had opened with full knowledge, the bank having full knowledge that I would be looking to do short selling, short sales in it in advance of reports. And they said, oh yeah, that's great. And you get the same access to borrow as you get on the institutional side of the house. I mean, yeah, it's going to cost a little more. But, you know, it's otherwise the same thing. And then they decided after a little while that they were going to, you know, somebody in compliance was like, no, no, we have to get rid of this account. And, you know, and I said to my private banker at the time, I was like, because she was talking about how, well, you know, we're really focused on.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, yeah, all right, back in 2014, it was clear to me that we were going to go into the fund management business at some point. And we were having a problem finding institutional counterparties. And because we were so controversial. At that time, for a while after that, It was an annual ritual where Goldman would tell us like no. And in late 2013, I was in the delivery room, my son was about to be born, got the call from prime brokered sales guy at CS telling me that, well, the reputation risk committee, something I never even heard of before, has met and said, no, we can't do business with you. With this guy, Bill”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's how manipulation occurs. With those skills, you know, Stanford computer science graduate is going to go work for the SEC. No.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Just committing fraud with respect to the financials. That would be stupid. That would be leaving money on the table. I mean, quite frankly, if this was the life you'd chosen to be a crook of this sort, you would not stop at that alone. You would manipulate the stocks. You would water the stock. You would do every single thing you could do. And I just don't think that you could get away with. And the mechanisms, one of the problems that we have with stock manipulation in the US is that so much stock trading is done algorithmically. Okay, the SEC is staffed by lawyers and accountants. Not quantum people who are NSA. We need people who have NSA type skills to be inside the SEC to monitor trading, whether it's China-based manipulation or somewhere else.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes. Or that the shares outstanding are because I've seen in the past I first started asking this question in 2011 or 12 because I could see that the ADS counts were rising a lot faster than the shares outstanding, meaning the shares that the company has issued. Now that's not unexplainable. That doesn't in and of itself mean that there's watering because as you have more legitimate shareholders fund their stock into ADRs and ADSs to sell it, you'll see that. But I just remember noting that some of these increases, the Deltas, the ADS accounts were growing exponentially and the shares outstanding, the Cayman shares weren't growing that much. And that's when it dawned on me. It's like, look, I've lived in that country six years total. I've done business there. They're not going to stop at just.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“The answer because this is really arcane aspects of plumbing, but I suspect nobody. I mean, these are Cayman share registries. That's the whole point of Cayman is that everything about Cayman domiciled companies is secret, especially the share registries. What is there? I've asked some people, and nobody's ever been able to answer me what safeguards are in place that would prevent these companies from doing that or prevent the insiders from doing that. And so I'm of this view that our entrepreneurial friends in China are so entrepreneurial that in many cases, not only are they completely lying about the financials of the company, but they're also manipulating the stock and they're also watering the stock. Meaning the share count is much higher.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, that's in the conventional sense, watering stock is issuing shares to people insiders in their proxies, but without Without recording those shares as having been issued. But what happens, what I think happens here that makes it so easy is you have to keep in mind that these companies are all domiciled in Cayman, or some are BVI, but they're legally domiciled in Cayman or BVI. And their shares don't trade on the U.S. exchanges. It's their American depository receipts or American depository shares. So what basically happens is if you have a Kingdom share, you take it to the depository agent and it's funged, exchanged into an ADR ADS that may be traded on the exchanges. But the question I've had is who the hell is keeping track of these Cayman shares that are coming to be given to the depository agents? And look, I don't know.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, God, you know, what goes on behind the curtain in China is very difficult to say, and there's also the lines between government and government actors and private sector actors are very blurry at times. But there's just funky, funky trading in a lot of these things. And it wasn't only GSX. A lot of other China names. And then the final thing that I'll say on this, nobody else I know talks about this, but I suspect that these companies water their stock all day long. And here's how they do it.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, I can't even remember. I mean, we weren't dealing with Fidelity, but I heard. I mean, Fidelity was a nightmare. Fidelity was increasing the borrow costs during halts on all these things. I mean, I think they jacked them from like 90% to 190% annually. So Fido was sucking people dry. On a halt for a company”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Because when the stock, the brokers realized that once the stock started trading, because there were all of these put options that had been exercised, everybody was going to be naked short. And so unlike when you're dealing with an institutional counterparty who would say like, all right, man, look, I get it. The stock's going to go down. Maybe after some initial volatility, once it's unhalted, we'll be chill and we're not going to buy you in right away. We'll wait till the afternoon to figure it out. That's how an institutional counterparty works. The retail counterparties were like, you will be bought.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're now short number of shares that's $500,000 worth of stock. We want 200% margin. So we need you to pump your account up, throw another $500,000 in there. That actually, I mean, that actually screwed me up. I was very fortunate that I got a loan from somebody who was, I mean, offered it to me just when I was lamenting. I wasn't asking for the loan. And so I was able to make money that way. But I think a lot of retail got shafted on those things. And the other thing that was problematic was.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, well, that was interesting in the early days because these stocks would be halted for multiple months. And, you know, we had puts going into put expiry. And so you have to decide whether you want to exercise them or not. And we ended up, I mean, the one time this really happened to us was on China Media Express, which was the third company on which we wrote would become the second delisting. And we had puts that expired during the halt. So we exercised the puts. But then, and this happened to a lot of, at the time I was using retail investor account. This happened to a lot of retail guys at this time. So we're effectively short. And the broker came back to us and said, oh, listen, we need you to deposit more margin. So based on the last print of the stock, when this thing starts.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh, they work. Yeah, we have eight D listings globally, seven of which are from China, and I'm not including Luckin. We might be about to get our ninth delisting in France, by the way. So what happens?”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“The may not list here because we would, you know, it's like, well, aside from the fact that everybody knows these things are committing fraud on a widespread basis, what can you point to in law? Because in the US, you know, we're really focused on give me a bright line definition of what may and what may not be listed. But now you have Article 177. So I think that any country that codifies a middle finger to U.S. regulatory bodies in its law, de facto should not be allowed to have its companies whose operations are substantially based there listed in the US. That makes perfect sense.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I think, you know, the problem that we face, let's be real here, okay? I mean, my view is that almost all of the companies, if not all the companies listed in the U.S. from China, are committing some level of fraud. They cannot be held accountable. Now, I think we could instead focus on this Article 177 of the amended securities law of the PRC that went into effect in March of last year. And that is the article that expressly prohibits cooperation with foreign regulatory investigations into publicly traded companies. That did not exist. That was not codified formally until the adoption of that revision. So before then, it was kind of hard to say that, well, we need to formulate a policy that says companies from China”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Let's take these guys to the other side of town and see if we can find this document at the Ministry of Finance. Oh, no, it's not here. Gee, guys, I'm sorry. Hey, how about we go to lunch and get drunk? I mean, this is what I envision happening is that their time would be wasted and they wouldn't understand what's going on. And like at the end of the trip, they would get back to Washington and just say, I don't know what the F happened, man. I don't know. We were there, but wouldn't it be more effective to say...”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“First of all, everything's in Chinese, so the vast majority of us in the US and who work at the PCAOB don't understand Chinese and you need things translated. Translation is incredibly resource intensive. So it's one thing, I mean, when you look at it from the SEC perspective, the costs of these investigations are super high for them. And again, the recoveries and probabilities of recoveries are so low. So that's one reason. I mean, like genuinely, the SEC enforcement division hates investigating these China-based companies. But you'd have the same problem with PCOB. Very few of the people would speak Chinese. They'd be jet lagged. They would have the Chinese Ministry of Finance people because it's clear that's the only framework China would ever allow this to happen. Shadowing them, being there, documents would be switched out would be missing. There would be all kinds of excuses like, oh, well, you don't understand how it is in China. Like we have to give this document over here.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's fake cooperation, right? That was the thing that was beautiful about most of these companies and still is. It's the fake transparency because one of the fundamental problems the SEC has in one of these investigations and anybody has is”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Did you ever feel that you were in danger? When I say messed with, I just mean fooled and stymied and stonewalled. I mean, that's what I'm going to do.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, there was a bill that was enacted and signed into law by President Trump called the Holding Foreign Companies Accountable Act, and it provides I've long held the theory that China would give on the PCAOB inspections because that's not really going to be an effective anti-fraud tool. Just inspecting these auditors. Like who cares? The PCAOB is going to be messed with during these inspections the same way everybody who's messed with whoever goes over to check out a Chinese company. Well, how do they mess with you”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Mostly more sophisticated. There's usually more reality to the businesses usually, GSX is an exception, but I feel like a lot of these stocks are manipulated and they're manipulated in very sophisticated ways.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Why wouldn't they? The proposition, if you're sitting in China and you've got a business and you meet the right people who say, hey, we can sex this thing up and bring it public, blah, blah, blah, you're thinking, oh, okay, well, heads I win. Tails, I don't lose. So why wouldn't you go and lie? And the other thing is that I think is more one of the changes that I've noticed in the 11 years that I've been doing this. Back then, when we first started publishing, the Chinese guys were not sophisticated with respect to the market. They didn't really get how things traded. And they, yeah, I mean, they got fraud, but the frauds were very crude basic frauds where you invent counterparty, you invent customer. And events suppliers. The frauds today”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, considering you stole the money, it's not bad. But no, these guys are better operators than that. But the issue, I mean, the reality is he just can't hold them accountable. And so when you have that system, so then also look at this. Some people say, oh, you're China basher, this and that. The reality is China is an emerging market. China has a weak rule of law. China is a country riddled by corruption, both public sector and private sector. And so all of these things are facts. don't even have the ability to investigate. I mean, of course these guys are going to come over here and lie and steal the money.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“800 mill Yeah, so I mean, look, I said, okay, 140 out of 800, that's the biggest VIG any one of these guys has had to pay in absolute terms and a percentage. And it's not that bad a vig. It's sub 20%. Still leaves you with over half a billion.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Confirmed that this thing was a fraud. And so luckin collapsed. But the people Luckin ultimately settled with the SEC. And out of the 800 million that it raised from U.S. markets, I think it paid to the SEC $140 million. And that's by far the most the SEC has ever gotten out of one of these China frauds. And the best part is look and raise that money with a bond issuance in China, I think 150 million US. That's a good deal. You raise $100.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“They literally cannot be held. The people behind these companies literally cannot be held accountable. Not only that, they can't actually be investigated. I mean, that's PRC law that specifically prohibits any PRC-based person or entity from cooperating with an overseas regulatory investigation without the express prior consent of the Chinese Securities Regulatory Commission, which except in the exceptional cases something like Luckin, where the auditor already called it a fraud, is just not forthcoming. So you not only can you not hold the individuals to account, you cannot investigate them. And I think Luckin's great example here because Luckin raised, I think about $800 million from the U.S. markets. And then the auditor, after we republished somebody else's research and said that Checked out to us. The auditor, EY,”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“A fraud can flourish on the markets until the markets figure out it's not a fraud. So I did question the viability over the long term of that business model. But the other thing was it just seemed a little hollow as well because I felt like, hey, if I'm publishing this openly, I can hold these guys accountable, right? But I'm just sending this to, you know, blah, blah, blah hedge fund for 50K a year from that fund. I don't know who's going to hold them accountable. Like why would this matter? Based on that, I said, all right, you know, like, let me figure out a way to get some capital and then start shorting these publicly. And so I made that decision. You know, I realized there was a business to do, and that was the model I wanted to pursue. And I probably made that decision by late August, early September of 2010.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Doing it publicly and trying to have some, you know, if I could get capital to short these things and then publish. And this was a decision that took, I don't know, some time to make because I realized that that was going to be the much more stressful path. I will get sued. Regulators, you know, I should assume that regulators will look at me skeptically every time we publish a report. I felt like if I'm just providing subscription research to institutions identifying various frauds in China, I mean, one issue is how valuable is the research if these things never go down?”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it was right after Orient paper that I realized that. I came to the States for two trips. One of them was about a month. And at that point in time, I was trying to, by then I realized this is systemic with these China names. And I was trying to figure out what the business model would be. Should we do consulting for investment banks that were looking to bring companies in China public? No, pretty quickly those doors slammed in our faces. They didn't want diligence, guys.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“I mean, the stock ended up getting down to below a dollar at times. I mean, there was this back and forth, right, where, you know, they would come out with press release and stock would go back up. It had been eight and a half when we published. So then it was kind of range bound between four and six. And then when we did our second or did our second report, or sorry, report on second company, Rhino International, that company had the misfortune of making the mistake of the CEO admitting to the auditor that there were, quote, some problems with the contract. And the stock was very quickly delisted. So after Rhino went down, I think Orient Paper sold off even more because the people who'd been skeptical of us were less skeptical of us.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. And yeah, and then they started lying about other things, trying to put the toothpaste back in the tube. But yeah, it was really right after that that just, you know, I mean, the report went viral. And I had a lot of people reach out to me and say, you know, wow, great report. Somebody's finally exposed this stuff. This is systemic. Look at this company. Look at that company. And I just started cracking open 10Ks and it was just obvious that all of these things that I was looking at, these things were fraud. I mean, it was just really obvious from the 10Ks. I mean, I skipped over the part about us reading the Orient paper filings before we went up there. We were in the airport waiting for our flight. And I mean, we just kept laughing out loud at different times. But again, we didn't get that this thing.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, stock went down day after we published a trough of 55, it's down 55%. Company came back, said my father and I had tried to extort them, and they refused. And, you know, and then when it was like, man, you know, because I was really nervous about that report to the moment I pushed the button. I mean, I knew everything in there was factual. I knew exactly what was going on, but I got checked myself so many times because it's a big deal and going out and saying this company is a zero and they're lying. That nervousness entirely disappeared when they came back and lied. I don't know that I needed extra conviction. I mean, I didn't, but the moment they started making stuff up about my father and me, then it was just like, you know, I mean, I was just like, I'm bringing you guys down. It changes the dynamic.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“They would have sued me anyway and just raked me over the coals in terms of legal fees. So I just, it was a leap of faith that I was going to be able to bluff my way out of getting sued. And it paid off. What happened?”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“He owned a nascent factory in China that was never able to get off the ground. He was constantly embroiled in brawls with bow steel, courtroom brawls, et cetera. So at that point, I didn't really, my thinking was, hey, I've got nothing to lose. I mean, the self-storage facility, like this thing is just a liability. What are they going to do? Take the liability from me by all means. You can have it. So it subsequently, when I looked back on this, I realized there's a real power in having nothing to lose. So I just threw the ball as far down the field as I could. And the one thing that I would hoped for, I hoped these guys would think that I had a sizable short position because I just knew I was confident I would win a litigation. But if they knew that I really had no money at all.”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source
“Wrong. So in early April of 2010, I realized they had gotten an unqualified audit opinion. I'd forgotten about the company for a while because I just had no economic model here. So I decided to produce a report that I don't know would explain that this thing's a fraud. And there was no template for me to write this report. It just kind of made the template up myself a combination of what I used to write when I worked with my father and how I learned to write as a lawyer. And we researched it and disclosed that we were short. Now I was, I owned $2,000 worth of puts and a consultant also owned $2,000 worth of puts. I funded them mine from my credit card and I think he'd basically done the same thing because he was”
2021-05-28 · Masters in Business · Carson Block on the Short-Selling Market (Podcast) · IDENTIFIED FROM THE TRANSCRIPT · source