For readers of Money Stuff who haven't paid much attention to the Luckin Coffee controversy yet, this anonymous white paper makes fascinating reading.https://twitter.com/muddywatersre/status/1223274746017722371 …
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Unsurprisingly, articles about short sellers generally focus on motivations, opposing quotes from company, insinuations that if they're wrong they're frauds and if they're right the enterprise is unseemly, etc etc, and rarely "Kinda like this newspaper but paid for accuracy."
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(It's a bit more complicated than "paid for accuracy" because markets are complex and you have to be *much* more accurate than the current market consensus *and also* good at the mechanics of putting on the short to have sufficient profits to cover costs of the operation.)
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(Which is one reason why it's much, much more attractive as a short seller to say "Oh I think that multi-billion dollar enterprise is a straight up fraud and that all senior management is going to jail" than "Wow the consensus overvalues same store sales growth by ~10%.")
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Funny story: shares that are delisted for being too fraudulent to trade are hard to buy back to cover short positions. Apparently some short sellers have been caught in positions for years.
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Yeah, I've seen credible reports of folks with ITM puts who exercised them near the last day of trading (peanut gallery: opens a short position at very large paper profit) who were then unable to cover and stuck with hard-to-borrow costs of ~100% (annualized) on the position.
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the stress of running a short book is so high tho. especially in a bull market. especially where you're dealing with fraud. you can be super high conviction and still only bet half your size bc it can run against you. management can be fraudulent longer than we can stay solvent.
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Do you ever miss your finance days
@swyx ?
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Not a weird Chinese coffee chain, butpic.twitter.com/s07ZZwoRgE
Thanks. Twitter will use this to make your timeline better. UndoUndo
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Another great thing about shorting is that if you're wrong you get to feel happy for the company, or abstract derivative, or whatever.Thanks. Twitter will use this to make your timeline better. UndoUndo
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