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View the article online at http://citywire.co.uk/wealth-manager/article/a760915

Gotham City Research renews attack on Quindell and defends short-sellers

by James Phillipps on Jul 09, 2014 at 07:00

Gotham City Research renews attack on Quindell and defends short-sellers

Gotham City Research has renewed its attack on Quindell and defended short-selling after its report into Let’s Gowex led to the Spanish telco admitting its chief executive had falsified the company’s accounts.

Gowex subsequently declared itself bankrupt and its outgoing chief executive Jenaro García Martín issued an apology via Twitter.

Gotham’s confrontational approach has seen it come under fire and receive multiple legal threats. But yesterday it again criticised Quindell, which it led a bear raid on in April, accusing its management of ‘committing market manipulation (and far worse).'

Gotham said: ‘Short sellers did not commit “market manipulation” in the cases of Gowex, Quindell, Ebix, and the other companies we covered. In fact, this is almost mathematically verifiable. We are confident, however, that these companies and their CEOs are guilty of committing market manipulation (and far worse).’

The research house spoke out in favour of short-sellers, saying they have a strong track record of rooting out fraud, whereas auditors, regulators, lawyers and investment bankers rarely detect it.

‘Therefore, perhaps market participants, the media, and regulators should focus on the validity of a short seller’s message, rather than shooting the messenger. Perhaps regulators should focus on investigating the companies and CEOs who benefit from spreading lies, rather than the short sellers who seek to expose them,’ Gotham said.

‘Take, for example, the following question and answer: How many short sellers have profited, historically, by spreading lies or committing “market abuse”? How many Companies, investment banks, and stock promoters have benefited from such? Answer: We are confident that for every 1,000 or 10,000 corporations/CEOs/stock promoters that have profited from wrong-doing, maybe one short seller has’.

‘Are short sellers biased? Yes, but aren’t CEOs, investment banks, and stock promoters biased too? So does a short seller’s profit motive render him/her evil and wrong, while the profit motive renders CEO/company/investment banks good and infallible?

‘A short seller is only as good as his/her analysis. In fact, the markets are swift and unforgiving when short sellers are wrong. The markets also very quickly punish short sellers who engage in deceitful practices. The same cannot be said of CEOs, investment banks, and other stock promoters, who can engage in, and profit from, misrepresentation and fraud for many years.’

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