Short-seller Citron changes course, adjusts to new reality

(Reuters) -Andrew Left, who spent two decades building his brand as one of the world’s best known short-sellers, on Friday turned his back on publicly detailing companies’ shortcomings, capping a week of intense backlash against him and others who said video retailer GameStop’s stock is not worth its price.

Andrew Left, the founder of Citron Research, speaks during the Reuters Global Investment 2019 Outlook Summit, in New York, U.S., November 12, 2018. REUTERS/Brendan McDermid

In a YouTube video posted on Friday, Left said his company would no longer publish short-selling research and shift to writing on companies that he thinks are worth buying.

The move generated huge interest on social media, where Left’s tweet was retweeted more than 5,000 times in the three hours, and in the investing community more broadly with questions of how this week’s wild gyrations will alter trading and potentially spark new rules from regulators.

"As of today, Citron Research will no longer be publishing what can be considered as short-selling reports," Left said in the video. here "The Citron narrative is going to change and have a pivot."

For decades, Left, Jim Chanos’ Kynikos Associates and Carson Block’s Muddy Waters Research ranked among the world’s most public short sellers, who would speak about their research, something most others avoided for fear of retaliation.

Left was no stranger to taking on big targets - he faced off against hedge fund manager William Ackman on Valeant Pharmaceuticals - and has tangled with regulators over a ban from financial markets in Hong Kong. But this week was unlike any other.

In the wake of publishing critical reports about video retailer GameStop, Left and other short sellers became a target for online investors who and bought up heavily-shorted stocks like GameStop and AMC Entertainment Holdings Inc AMC.N.

Even as Left said he would stick to his short position on GameStop, investors ganged up and sent the price so much higher that he had little choice but to exit and take the loss.

The stock has kept climbing and is now trading at $339.90. Left put his short position on when it was trading in the $40 range.

“If you choose to buy GameStop here, it’s caveat emptor. You know what we think about their business model. It’s on you,” Left said in the video.

The stomach-churning market movements also wounded hedge funds, including Melvin Capital, which received a financial life line from two prominent hedge funds on Monday, and Maplelane, which had lost roughly 45% this year through Wednesday.

The attacks on Left turned personal. Someone created a fake Tinder account for him, another hacked into some of his social media accounts and yet another ordered pizza that showed up at his doorstep.

“Andrew has been a very successful investor on the long side, and I think activist short selling just wasn’t important enough to his business to justify the headaches,” Muddy Waters’ Block told Reuters.

Left said he respects the markets and that at age 50, he is ready to adjust to new conditions.

“When we started Citron, it was to be against the establishment. But now we’ve actually become the establishment,” he said.

Reporting by Svea Herbst-Bayliss, Anirban Sen, Niket Nishant, Shariq Khan and Sohini Podder in Bengaluru; Editing by Shounak Dasgupta, Anil D’Silva and Dan Grebler