Nisha Gopalan is a Bloomberg Gadfly columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Avengers assemble!

The successful Marvel Studios superhero franchise seems to be the guiding spirit behind the "anti-malicious short selling alliance," an unconventional fraternity proposed by Hong Kong's corporate victims of short seller attacks.

Company bosses banding together and swapping crisis-management advice may be a legitimate activity, but a Bloomberg News article about the plan said the new club might even offer equity support to its members.

A concerted effort to prop up falling share prices in the former British colony would be problematic. Gadfly opposed such a move when it appeared China's government was toying with the idea of creating a positive atmosphere ahead of President Xi Jinping's visit to mark the 20th anniversary of Hong Kong's return to Chinese sovereignty.

If meddling by the state is unwarranted, a coordinated defense by corporate chiefs, such as Chinese developer Fullshare Holdings Ltd., the subject of two public short seller targets,  is pure fantasy.

It'll take larger-than-life characters to make the outlandish plot even halfway believable. But this movie's Hulk, who could smash the short sellers' backs (and bank accounts) doesn't exist. Iron Man, who would lift the tesseract of allegations about dodgy accounting and shove it into the wormhole of oblivion, is still awaiting his signal from a missing Nick Fury, the putative ringmaster of this effort who would surely risk courting jail time for share-price manipulation.

Attention Span
Short selling as a percentage of Huishan Dairy's free float reached a high in December after the Muddy Waters report
Source: IHS Markit

Most importantly, where's Stan Lee, the creator? Without somebody hustling for financing, this film isn't going to make it to the theaters.

Hong Kong's stock market is dominated by mainland firms whose assets aren't within reach of local regulators. However, of late, their opacity has become a magnet of sorts for naysayers.

Fullshare, facing critical reports on its shares from Glaucus Research and GeoInvesting LLC's short-biased fund, has plenty of company. Over the past six months, other Chinese firms that have been targeted include China Huishan Dairy Holdings Co., China Hongqiao Group Ltd. and Apple Inc. supplier AAC Technologies Holdings Inc.

Ready, Unsteady, Go
Tongda Group slumped as much as 19 percent amid surging short interest
Source: Bloomberg
Intraday times are displayed in ET.

On Monday, e-commerce platform operator Cogobuy Group joined the party, tumbling as much as 27 percent. Tongda Group Holdings Ltd., which supplies consumer electronics components, fell 19 percent amid a surge in short interest.

Still, investors are bound to take a caustic view of any alliance aimed at beating back those who question accounting practices or allege fraud.

As David Webb, a shareholder activist and editor of, says:  

“I don’t invest in companies so that they can lend my money to others or punt the stock market. Companies that join such an alliance to invest in shares or debt of other companies risk contagion. They should announce their membership as price-sensitive information, so that we can all avoid owning their shares or bonds, and banks can avoid lending to them in the first place. The alliance should be isolated from the market -- perhaps there is a reason for a Third Board after all, a kind of corporate leper colony. Companies whose boards feel they are at risk of attack should look in the mirror and ask themselves why.”

Not all attacks succeed, and short sellers must contend with not only losses if they are wrong, but, in rare cases, penalties from regulators. Hong Kong's publicly traded firms can also request a suspension in their shares quite easily, trapping short sellers. Stock in Tianhe Chemicals Group Ltd., whose value plunged $3 billion in 2014 after a short seller attack, hasn't traded since March 2015.

Just because some challenges fail, and some companies go on to live a relatively normal life, short sellers can't be said to garner an unfair advantage by spreading rumors and innuendo. Assembling the avengers to get shorty would just be an unintentional parody. And not a very funny one.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. The Third Board is an exchange Hong Kong is planning to launch that would mainly accommodate technology companies.

To contact the authors of this story:
Nisha Gopalan in Hong Kong at
Andy Mukherjee in Singapore at

To contact the editor responsible for this story:
Katrina Nicholas at