No. of Recommendations: 3
Value After Hours podcast had a quick chat about the short report.
Possibilities/comments
Report appears to be an objection to IFRS accounting rules, rather than a fraud accusation. Report makes little sense unless market manipulation.
Bizarre company to pick to short, given the long list of bubble stocks and genuine awful businesses to choose from.
Motivation may have been attention seeking to bring in FUM.
Or may have picked FF, as an opportunity, to shake out anxious holders, given share price performance over past year (take profits). Plus the nature of insurance and private company investment valuations, which are indeed subject to significant management estimates. Easy to spook investors. If that was the case, it certainly worked.
If this was a simple short, then publish and then close position, then go long, it would be a strategy that worked. Given the manipulation we have seen in financial markets in recent years in other much larger stocks, which goes unpunished by authorities…I guess it be investigated but nothing will happen?
Perma sued a previous short seller. Risk for this recent attack of at least, defence legal fees.
I would add, in hindsight, looking at the price action and timing of publication of earnings (which were highly likely to be very strong), that this looks odd. It drove the price down 12% in a day. And the earnings report a few days later sent it back up. That is a big round trip and having a trading strategy perhaps using leverage and options, quite a bit of money could have been made in an extremely short period of time.
Or, it may be that the short report is sound. It may be that the author did not trade around its publication, or the earnings release. Whatever, it’s a useful reminder of what can happen in financial markets. I have no idea what happened here.
