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25 Biggest Activist Short Sellers in the Hedge Fund World

The world of investing is both complex and simple at the same time.

What makes it simple are its basics – invest your money in a business and profit from it. Its complexity lies in so many options, strategies, tactics, and ways to do that. While most common people are familiar with said fundamentals of the industry, those who are not part of it can’t even imagine how many tricks of the trade exist.

Today, we have decided to cover one particular investment strategy called short selling, or simply shorting, and to list those who are best known for utilizing it. For the sake of those who are not knowledgeable about short selling, we’ll start first by providing a simplified description. Basically, to understand what it means to short a stock one should think about the opposite of buying a stock. When an investor buys a stock, which is often referred to as going long, they bet on its price going up, but when they decide to short a stock, they bet on its price going down. How do they profit from declining prices? Simply, an investor just borrows a stock it expects to go down, sells it before its price drops, then buys it back at a lower price and returns it, earning the difference. So, this is basically a bet against the stock. Even though it may sound simple, this investment strategy is very risky and it is recommended only to experienced investors. Short selling carries a higher risk in terms that you can lose more money than you invested if a stock price jumps high enough (instead of going down as you anticipated), whereas when going long, in the worst case scenario, you can lose only the amount you’ve invested.

Vintage Tone/

Vintage Tone/

According to Activist Insight’s Activist Short Selling report published in May 2018, activist short selling has become an influential part of the market in the last couple of years, in spite of decreasing number of activists short selling campaigns. The report further suggests that there may be various causes of this decline, such as a difficult market environment and lack of resources for comprehensive research these strategies usually require. Nonetheless, 70% of campaigns ran in the previous years managed to achieve profits in the same week of its launching. Interestingly, as per the report, those earnings were not equally distributed regarding marketing strategy, market cap, or accusation type, and what’s more, anonymous short sellers have managed to achieve higher one-year campaign returns, bringing back 13% on average, versus 3% popular short sellers returned. This is, perhaps, due to the structure of social media websites that favor new and mysterious industry players.

When it comes to types of short sellers campaigns that are most profitable, big business frauds, stock promotion frauds, and accounting frauds are at the top, returning from 11% to 13% in one week of the campaign on average.  In the long run, fraudulent stock promotion is the most profitable, bringing back 41% in one year on average, followed by claims of a company’s product being futile, which result in a return for a short seller of 32% on average (in one year period). Big business frauds return 23% on average, over the course of 12 months as well. Accounting frauds, on the other hand, lag far behind, with the average return in the same period of only 2%. Companies that are mostly targeted in recent years, mainly belong to healthcare, technology and services sectors, and are of small, mid and micro market caps.

Let’s take a look at some of the most popular names in the industry – 25 biggest activist short sellers in the hedge fund world:

25. Mako Research

Mako Research is one of those anonymous short sellers we have been talking about in the intro part of the article. He publishes his investment thesis on Seeking Alpha, and his profile currently has 1,018 followers. Mako Research mainly focuses on small companies in tech and biotech sectors, with its latest report from May 23, targeting T2 Biosystems, Inc. (NASDAQ:TTOO).

24. Prescience Point Capital Management

Eiad Asbahi launched his own research firm in 2009 and called it Prescience Point Capital Management. The firm is based in Baton Rouge, LA, and it utilizes both long and short investment strategies. On the short side, it researches fraudulent companies and exposes them in public, sharing reports on its website and Twitter account. Its latest slamming report is on Kellogg Company (NYSE:K). Prescience Point Capital Management found its place among “100 Best Finance Twitter Accounts You Should be Following” chosen by Forbes.

23. White Diamond Research

White Diamonds Research is a short-selling oriented research firm with the main focus on the technology and health care sectors. According to information from its website, the fund has a 90% success rate verified by a third party company. You can track its reports both on its website and on Seeking Alpha; the latest one attacks BioSig Technologies, Inc. (NASDAQ:BSGM).

22. Hindenburg Research

Hindenburg Research, a research company with specialty in activist short selling, was founded by Nate Anderson. It searches for companies that are having issues such as misleading financial reporting practices, accounting irregularities, Illegal businesses, and similar. The fund publishes its research reports about those kinds of companies on its website and on Seeking Alpha. According to the website, its latest short position was initiated in Eros International Plc (NYSE:EROS), on which the fund has presented its views and findings.  

21. Alpha Exposure

This is yet another anonymous short seller, who writes under the pseudonym Alpha Exposure sharing his thoughts on Seeking Alpha, covering individual stocks, which he is able to evaluate himself. His profile on the site currently has 2,373 followers, after 8 years of publishing reports. Alpha Exposure’s latest smashing report is from May 14th, and it targets Corbus Pharmaceuticals Holdings, Inc. (NASDAQ:CRBP).

20. Wolfpack Research

According to its website, cleverly named Wolfpack Research is a global financial research company which aims to reveal corporate frauds, all in the goal of looking after investors, and maintaining a healthy market environment. It was founded by Dan David, who has 30-years long professional career in this industry, during which he has managed to reveal more than $15 billion worth frauds on the US Capital Markets. He has been known as a China stock expert, focusing on US-listed China-based stocks. 

19. Aristides Capital

Aristides Capital is a long-short hedge fund with $95 million in assets under management. It is focused on microcap stocks, and since its inception it had no down year, returning 17.44% annually through 2018. Its managing member, Chirs Brown is known to the public for various short picks and degrading reports. On its website, you can find his slamming report on Energous Corporation (NASDAQ:WATT) published in June 2018, whereas his more recent short idea – Tilray, Inc. (NASDAQ:TLRY), a cannabis-based company, was pitched at the Tilson Conference in December.

18. J Capital Research

J Capital Research is a short selling-oriented research company that was founded in 2007. Its headquarters are in Central, Hong Kong, and additional offices are in Dallas, Texas; London, the United Kingdom; Sydney, Australia, and Beijing, China. The fund mainly focuses on China-based companies, or those big companies that have exposure to the Chinese market, and with market caps of around $2 billion. On J Capital Research’s website you can find its newest public reports on companies it is shorting, with the last one dating from May 29th, and covering A. O. Smith Corporation (NYSE:AOS).

17. Aurelius Value

This yet another anonymously acting, activist short seller, who publishes his/her reports on Aurelius Value website, named after a Roman emperor (in no relation with an NYC-based private investment firm, Aurelius Capital Management). We already covered Aurelius’ latest report from June 7th on a stock this short seller is currently shorting, Pareteum Corporation (NASDAQ:TEUM), in our article Pareteum Corporation (TEUM) Responds to Short Seller Aurelius Value’s Accusations.

16. ShadowFall Capital

ShadowFall Capital is a European short-oriented hedge fund that looks for accounting frauds, unreliable business practices of publicly traded companies, which have been overvalued by the market. By revealing the truth, the fund enables its client to profit from false market sentiment. On Its website, you can track down various reports that point many inconsistencies in public files of such companies. In December last year, at the Tilson Conference, Shadowfall Capital’s Matthew Earl presented Arcadis as its short idea.

15. Richard Pearson (Moxreports)

Ricardo Pearson is an activist short investor in the US and Chinese stocks. Before he started publishing his reports on Seeking Alpha, he worked as an investment banker in New York, London, and Hong Kong, with a primary focus on equity capital markets. At the moment of writing, his profile on the mentioned website has 5,354 followers, but his last report was published more than one year ago. Namely, in March 2018, he published a report on  Vuzix Corporation (NASDAQ:VUZI), with the title “Vuzix: Far Worse Than Anyone Had Imagined”, but soon after the company filed a lawsuit against him claiming that the things written in the report are false and misleading. Nonetheless, Vuzix’ stock lost around 44% since the time of the report until the time of writing this article. He has also been sharing his investment thesis and analyses on its personal site Moxreports since 2012.

14. Blue Orca Capital

Blue Orca Capital, sharply named after the dangerous killer whale, is a famous Texas-based short-selling activist. It became widely famous after slamming Samsonite last year, revealing that the company’s former CEO has lied about his education, and claiming that the company was using questionable accounting techniques. Blue Orca Capital was founded by an already well-known short seller, Soren Aandahl. On its website, you can track down the fund’s reports. 

13. The Street Sweeper

The Street Sweeper is another short-oriented activist hedge fund that has been exposing fraudulent public companies for 10 years. Over that decade since its inception, the fund published reports on hundreds of such companies. Its latest report, published on The Street Sweeper’s website, was about Cel-Sci Corp. (NYSE:CVM), for which the fund wrote is too risky and overvalued. Read the entire report here.

12. Gotham City Research

According to Activist Insight’s report, Gotham City Research was the third top short seller by average one-year campaign return in the period between January 2013 through March 2018, delivering 44.78%. It was founded by Daniel Yu, who holds the opinion that short sellers should share their opinions on stocks because they believe the company is already a good pick for a short position, and not because they think that publishing a report would make it a good short. Gotham City Research publishes its reports about publicly traded companies on its website. Its last report is dated  September 27, 2018, and it covers Medifast (NASDAQ:MED), for which the fund claimed its products are causing gastrointestinal issues.

11. Bonitas Research

Bonitas Research is another hedge fund with a primary focus on investigating and exposing publicly traded companies that are running fraudulent activities. It was founded in 2018 by Matthew Wiecher, who previously founded another equity research firm called Glaucus Research Group. According to its website, where the fund publishes its reports about the companies, the fund has been recently slamming Best World (BB:BEST __ SGX:CGN).

10. Geoinvesting (Dan David)

If you haven’t heard of Dan David in the world of activist short selling before we mentioned him earlier when we talked about Wolfpack Research, you may have heard of him in the world of politics. Namely, this famous activist short seller, known for making millions by uncovering publicly traded companies with false finances and running other fraudulent activities, was also last year’s candidate for Congress, but he didn’t win. This means he will have more time to look for new short ideas while running Geoinvesting, another hedge fund, he co-founded.

9. Muddy Waters Research

This privately held due diligence oriented investment manager was launched in 2014. It provides research services covering all kinds of usual frauds in publicly traded companies, such as accounting fraud, business fraud, and also other structural problems. Its reports on fraudulent publicly traded companies you can track on Muddy Waters Research’s official website.

8. Viceroy Research

“A group of individuals that see the world differently” is stated in “About” section of this activist short seller’s website. According to Activist Insight’s report, in the period from January 2013 through March 2018, Viceroy Reserach was the top short seller by one-week campaign return with 17.32% on average. Lately, the fund has been targeting Ebix, Inc. (NASDAQ:EBIX), claiming the company has accounting issues and presenting it as its short idea at the Tilson Conference last year.

7. Citron Research

Citron Research is an online investment newsletter founded and edited by Andrew Edward Left, an activist short seller. This newsletter has been publishing for more than 17 years, earning a reputation of one of the longest running online stock commentary websites. Since its foundation, Citron Research has published more than 150 reports on fraudulent companies.  As per Activist Insight’s report, Citron Research was the fourth among the top short sellers by the number of activist short campaigns in the period between 2013 and 2018, reporting 54 of them. We have relatively recently covered consequences of one of its reports in our article – Jumia’s Share Price Drops In the Aftermath of Citron Research’s Proclaiming It Fraud.

6. Kynikos Associates (James Chanos)

Kynikos Associates is a New York-based hedge fund that runs several funds, including those short selling oriented. It was launched back in 1985 by now famous activist short seller, James Chanos, who mostly targets publicly traded companies with fraudulent accounting activities. He gained popularity by targeting merchant bank Enron, which ended up being the main topic of a book and documentary called The Smartest Guys in the Room. Around 13 months after James Chanos initiated his short position, the company filed for bankruptcy. According to Institutional Investor, it is an open secret that James Chanos’ Twitter alter ego is Diogenes, who is “searching for honesty on the Street”. Diogenes often tweets about the companies he is shorting.  

5. Quintessential Capital Management (Gabriel Grego)

Quintessential Capital Management is a New York-based hedge fund founded in 2017 that utilizes long/short investment strategies. Its market neutral strategy is concentrated on activist short selling, with the fund trying to expose fraudulent corporate companies. The fund’s founder Gabriel Grego presented his latest short idea at the Tilson Conference in December last year presenting one of the largest cannabis companies in Canada, Aphria Inc. (NYSE:APHA).

4. Spruce Point Capital Management (Ben Axler)

Spruce Point Capital Management is an NYC-based activist short seller, founded in 2009 by a renowned short seller, Ben Axler. Before launching his own hedge fund, Ben Axler honed his investment acumen at Credit Suisse and Barclays Capital where he was in charge of M&A deals for main Fortune 500 clients among other duties. According to Activist Insight, Spruce Capital Management was the fifth top short seller by the number of campaigns reporting 37 of them in the period from January 2013 until March 2018, and also the second most successful short-selling activist in 2018. Ben Axler earned a Masters degree in Statistics from Yale University and Bachelor of Arts in Statistics and Bachelor of Science in Marketing and Business Administration from Rutgers College, graduating with Phi Beta Kappa honors and Summa Cum Laude. On Spruce Point Capital Management’s website you can find its recent research reports about companies it is shorting, with the latest one being released yesterday, concerning Axon Enterprise, Inc. (NASDAQ:AAXN). More detail about it you can find in our article – Investors Don’t Find Short Seller’s Claims Credible.

3. Kerrisdale Capital (Sahm Adrangi)

Kerrisdale Capital is an activist hedge fund that utilizes long/short hedge fund strategies. It was founded in 2009 by an investor famous for his short selling moves and publishing research, Sahm Adrangi. Its initial capital was less than $1 million, and over time the fund has grown managing $150 million as of July 2017. Mr. Adrangi became famous in the short selling world for revealing deceitful Chinese companies in 2010 and 2011, such as China-Biotics, and China Marine Food Group, among others. In the last couple of years, several industries have caught Mr. Adrangi’s attention – mining, biotechnology, and telecommunication. He graduated with a BA in Economics from Yale University. On Kerrisdale Capital’s website, it is possible to follow their latest research, one of them being the report on iRhythm Technologies, Inc. (NASDAQ:IRTC).

2. Greenlight Capital (David Einhorn)

David Einhorn’s Greenlight Capital is another long/short-oriented hedge fund. It was launched back in 1996, and since then until today it has had its worst year in 2018 when it lost 34%. The fund mainly invests in publicly traded equities in the US, and it became famous for its short selling of Lehman Brother’s stock before its bankruptcy in 2008.

1. Pershing Square (Bill Ackman)

Pershing Square Capital Management is a hedge fund launched in 2004 by a renowned investor Bill Ackman. He is known to say that when he finds an interesting company for a short position he would go “to the end of the earth”. At least, this is what he said when he discussed shorting Herbalife Nutrition Ltd. (NYSE:HLF), which ended up being his worst failure, with the fund losing around $455 million. In his public presentation about the company, Bill Ackman mostly criticized its business model accusing it was a pyramid scheme. Bill Ackman’s biggest success in short selling was MBIA.

If you have suggestions to broaden this list of 25 biggest activist short sellers in the hedge fund world, please share them in the comment section below.


Disclosure: None.

This article is originally published at Insider Monkey.

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