Engagements

Bear raid & market manipulation

A prominent short-seller triggered a sell-off of a consumer products company’s shares when it promoted a theory of channel stuffing at an investor conference. CRA team members were enlisted to investigate recent phone calls to the consumer products company investor relations office requesting information about the distribution channels at the core of the short-seller’s theory. The investigation established connections between certain callers and hedge funds known to have co-invested with the short-seller’s hedge fund in previous situations, suggesting that the funds may have collaborated in a bear raid against the client. The investigation also linked early trading to the prime brokers through whom the short-seller was known to trade, and the results of the work were presented by outside counsel to the SEC to request that they consider opening an inquiry into what appeared to be a case of share price manipulation. The issue became moot when the client entered a merger that caused its share price to rise and gave the short-seller’s hedge fund the largest loss in its history.

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