The fact that he's shorting GE should probably give you more confidence that he's right. That demonstrates skin in the game. He's not just speculating idly - he's putting his own assets at risk in the bet.
And then you get charged for fraud, SEC doesn't take these things lightly... with this much public attention you'd have to be crazy to try to pull of a scam like that hoping to get the money without showing any proofs to the claims...
I don’t know enough to comment on that, but the point is that so long as they are based on a shred of truth, even if over emphasized, it is hyperbole not fraud.
It can't be that hard if you have some credibility you are willing to sacrifice. If this report turns out to be complete BS, they still could have made over 10% return in a single day by the way the market reacted today.
they really better genuinely believe that this is true, and have lotsa evidence - or the fact that they stand to gain financially is going to be used to hit them very, very hard.
Alot of people just lost money, if it's for reasons - they will suck it up. If it's because "you made it up" then they will get their pounds of flesh, and not from the numb bits.
GE was founded 130 years ago, they've been through some shit and one of the most stable and well-known brands in the history of America if not the world. We're not talking about Uber here.
Nobody with any capital in significant amounts is going to take this report at face value. They're going to investigate the claims on their own before they make any moves.
Roughly $7 billion in value disappeared from GE's market cap today. People are certainly going to investigate this more and the stock will move in one direction or another depending on the validity of the report, but regardless of the ultimate outcome significant capital was moved around today which presented an opportunity to make a lot of money.
It seems to me he is being paid by hedge funds to come up with research that supports their short positions. I see no evidence anywhere that he's shorting them using his own personal funds and even that would not necessarily give me any additional confidence he's right.
With your logic one might also claim that promoters of pump-and-dump schemes should be commended for having skin in the game.
> I see no evidence anywhere that he's shorting them using his own personal funds
From page one of Markopolos' presentation:
> [...] members of the Company are personally in possession of securities, derivatives, and/or other financial instruments of, and correlating to, GE, which may generate profits should the price of GE securities decrease
To be clear: I think Markopolos is on to something here, and the presentation does a pretty good job of showing how GE is sitting on some really really bad news for its investors. But yeah, he's definitely shorting GE personally in addition to whatever he's getting from the sponsor.
And there's nothing wrong with that! This is the whole point of having public securities markets!
Why would I pick a company to short, and then pay someone to bad mouth that company?
Seems like a lot less risk to pay analysts to find possible frauds, and then short them while disclosing what they found.
The Netflix series "Dirty Money" introduced me to this concept, episode 3 "Drug Short" covers the analysts who called out Valeant Pharmaceuticals and took a pay day for their hard work through shorting the stock. Really I found it inspirational :)
Not if this research is what causes the stock to drop and is what allows them to collect a reward. Then the merits of the accusations doesn't actually matter and they don't have to true for the people shorting the stock to profit from releasing them.
I have no idea if these accusations are true, but the accuser's short position on the stock has zero positive bearing on the validity of the accusations.
> Not if this research is what causes the stock to drop and is what allows them to collect a reward.
I don't understand the causative relationship you're asserting between a drop in value and a whistleblower award that's only granted after an enforcement action. How would a drop in stock value result in a whistleblower award?
Sorry, I misunderstood your comment then. I though you were using "reward" generally. A financial windfall from shorting a stock and then releasing bad news about the stock is a "monetary reward" that doesn't depend on the merit of the accusations. I didn't realize you were speaking specifically about a "whistleblower reward" which wouldn't be awarded until well in the future after the report had been verified.
What are you talking about? There is zero whistleblowing going on here. This is an outside investigative report funded by a hedge fund. The only link to whistleblowing is the investigators biography.
> Prior to the initial distribution of this Report on August 15, 2019, the Company also submitted this Report to the U.S. Securities and Exchange Commission’s Whistleblower Program and the U.S. Department of Justice’s FIRREA Whistleblower Program. Both or either of those submissions may generate profits for the Company independent of the financial performance of GE and/or the securities, derivatives, and other financial instruments of, and/or relating to, GE.
I don't know how the DOJ program works but SEC Whistleblowers can be awarded 10-30% of the money recovered as a result of their information.
He’s putting his reputation up against it, which apparently is powerful enough to make the stock slide. He makes money either way (since correctly seeing he can move the stock price), the question is whether he comes out of it with his reputation.
It depends on when he closes the shorts. If he holds them I am fine but it’s also conceivable to buy shorts, publish bad news, see the stock drop and immediately close them.
It's my understanding that "publishing bad news" does not equate to the subject in question being "true", certainly not in today's media climate. Had the OP said something like: "publishing evidence of bad things" then of course that the discussion would have been totally different. And to judge by the discussion in this thread the linked article is not "evidence", is merely "news".
To recapitulate: willingly publishing "bad news" (which you don't have any evidence that they might be true or not) in order to financially gain stuff on a stock exchange should be treated as securities fraud.
The part where he says that he hasn't make everything available because he has fw-ed some information to the police/authorities. Until said police/authorities take the necessary actions (if needed) based on the provided info is best for the parts involved to let said authorities decide if the facts provided are evidence enough.
Also the part where he complains about GE's profit margin being the same as Madoff's, i.e. a guy who was active in a completely different industry, while companies/conglomerates active in the same markets as GE post similar profit margins as GE. This part is fake news pure and simple.
All you need to do is convince the market that you're right long enough for the price to drop and cover your short.