(Aug 21): Andrew Left, the US short-seller whose early warnings on China Evergrande Group got him banned from trading in Hong Kong, isn’t in a gloating mood.
After the real estate developer’s founder, Hui Ka Yan, and dozens of associates were sentenced in a Chinese court on Thursday, Left said the drawn-out saga only underscores the inherent perils of short selling.
“Evergrande went up roughly 500% after I called it a house of cards,” Left said in a email to Bloomberg. “Being right and being early aren’t the same trade, and a stock can stay irrational longer than anyone’s conviction lasts.”
The founder of Citron Research was fined HK$1.6 million (RM824,394) and hit with a five-year trading ban in Hong Kong in 2016 after questioning Evergrande’s financial soundness. The penalty came after Hong Kong’s Securities and Futures Commission accused Left of market misconduct by making “reckless” allegations about Evergrande in a 2012 research report.
Left faces his own legal troubles in the US, where he was found guilty of securities fraud in June. Prosecutors accused him of using explosive social media posts about dozens of companies to influence their shares for quick profits. He is awaiting a post-trial motions hearing in November and sentencing the following month.
Hui was handed a life sentence in Shenzhen court room on Thursday, capping one of the most dramatic downfalls in Chinese corporate history. After a rapid rise, Evergrande defaulted on a massive debt load, while China’s securities regulator later said it had vastly inflated its 2019 and 2020 revenue and profits.
A visibly aged Hui, appearing in court with greying hair, was sentenced alongside 56 associates, including his sons Xu Zhijian and Xu Tenghe. His assets will be confiscated, and his companies were fined a combined 15.82 billion yuan (RM9.5 billion).
“The amount involved in the crime is exceptionally large, the circumstances are particularly heinous, exceptionally heavy economic losses have been caused, and the harm to society is extremely grave,” state media outlet Xinhua reported on Thursday.
Before they were delisted last year, Evergrande’s Hong Kong-listed shares had plunged by more than 99% from a 2017 peak. The selloff wiped out about US$50 billion (RM202.06 billion) of stock market value.
Left took no satisfaction in the trial’s outcome.
“For whatever it’s worth, I never wanted a day of prison for Hui, or for anyone,” he said. “Watching that sentence come down wasn’t satisfying.”
Uploaded by Felyx Teoh