markets

Short-Seller Glaucus's Frontmen Part Ways, Eyeing New Targets

  • Blue Orca, Bonitas to focus primarily on short-selling ideas
  • First Blue Orca report due on a Hong Kong company “soon”

The co-founders of Glaucus Research Group are setting up separate short-selling operations, having recently capped off their seven years of critical reports with a successful thesis against Australia’s Blue Sky Alternative Investments Ltd.

Soren Aandahl, former director of research at Glaucus, has started a new activist investment fund Blue Orca Capital LLC, and plans to release a critical report on a Hong Kong-listed company soon. Glaucus co-founder Matt Wiechert’s new venture Bonitas Research LLC also focuses on short selling.

“Blue Sky was a fantastic note on which to go our separate ways,” Aandahl said in a phone interview. “If you think about it like a band, like Simon & Garfunkel, quite a lot of hits together, but at some point all Simon needed was to go out and do his own music. And that’s exactly what’s happening here.”

Austin, Texas-based Blue Orca has four investment analyst professionals with experience in law, investment banking and buy-side research, according to Aandahl, who is also the fund’s chief investment officer. The focus will primarily be on finding short-selling targets globally and Blue Orca’s first report could potentially be released in the next few weeks, Aandahl said.

“We’re ramping up the scope of what we’re looking at,” Aandahl said. “It’s going to be probably the biggest name we’ve ever done in the Hong Kong market.”

China Connection

Various short sellers, including Carson Block, have alleged that links between equity markets in Hong Kong and China facilitate stock manipulation. Glaucus, which started off by targeting U.S.-listed Chinese shares, has had several successes over the years.

Hong Kong-listed Tech Pro Technology Development Ltd. tumbled 86 percent in July 2016 on the day the short seller published a negative report on the stock. The maker of LED lighting products is currently suspended from trading. Over in Australia, Quintis Ltd. fell 79 percent before being suspended from trading in May 2017 and entering administration in January, following Glaucus’s report last year.

In the researcher’s most recent win, shares in Blue Sky Alternative Investments have plunged more than 70 percent since March, when Glaucus said the Brisbane, Australia-based company’s fee-earning assets under management were much lower than the reported figure. Blue Sky said the assertions were inaccurate, before cutting a forecast for the fee-earning assets and commissioning an independent review to look at its disclosures for financial reporting and valuations.

The Blue Sky thesis is now cited on Glaucus’s website as a collaboration between Aandahl’s Blue Orca and Wiechert’s Bonitas Research.

“I started Glaucus in 2011 with a hopeful idea for a business and very little practical experience on the short side,” Wiechert said in an emailed response to questions. “Bonitas will work to identify and expose fraudulent activity in the global public capital markets and we will publish our findings on our website.”

Not all of Glaucus’s short ideas have worked out. Fullshare Holdings Ltd has risen 28 percent after the short seller said the Hong Kong-listed stock was “poised to crash,” while Itochu Corp. has jumped 61 percent in Tokyo since Glaucus bet against the trading house’s stock.

Aandahl doesn’t rule out Blue Orca becoming an activist shareholder in some companies later on, and also sees short-selling opportunities in the European market.

“With Glaucus we never did a European idea, but with Blue Orca going forward it’s definitely an area where I think there’s a lot of room to grow,” said Aandahl, who is due to present at the Sohn Conference in Hong Kong on May 30. “I’m surprised that we haven’t done anything in the U.K., but we expect to.”

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