Fairfax 2024

[UK]

So I was reading about this whole situation and allegations (which seems quite silly and bizarre, nothing to add, and many thanks everybody for discussion on it), but one thing, if true, I do not quite understand:

 

"Block appeared on CNBC on before markets opened Thursday to reveal his short position. Data compiled by Bloomberg show that 0.7% of Fairfax’s float was shorted as of Thursday morning."

 

"Fairfax currently has a short interest of 0.65% of free float worth C$203.81 million ($151.36 million), with short sellers having made over C$21 million in paper profits so far today, according to data from Ortex."

 

How does this short selling operation even make any sense, If short interest is really so low?

 

Edited February 9 by UK

[Xerxes]

Few years I complained about FFH not being on NYSE for that added liquidity etc

 

looks like not being there may actually helping them 

[MMM20]

39 minutes ago, UK said:

 

How does this short selling operation even make any sense, If short interest is really so low?

Low short interest just means it’s not a highly shorted stock and the borrow cost is probably cheap. In other words, it’s a contrarian short (at least not a crowded one) which is the best kind if you’re proven right.
 

In this case, I think the odds are good that some big fund out there with a ~$50-100mm short decided to exit before earnings and therefore paid Muddy Waters with their big following to publish this during the quiet period. This is quite common and somehow legal, though regulatory changes are apparently in the works right now.

It might also partially explain the low quality of the work vs. some others we’ve seen from MW.
 

Edited February 9 by MMM20

[Spooky]

29 minutes ago, Gmthebeau said:

ok, good luck with your investment.  

 

If you don't know anything about the company why are you even posting here? Please at least bring some analysis to the table if you are going to post.

[UK]

8 minutes ago, MMM20 said:

Low short interest just means it’s not a highly shorted stock and the borrow cost is probably cheap. In other words, it’s a contrarian short (at least not a crowded one) which is the best kind if you’re proven right.

 

Yes, but didn't they supposed to accumulate their position (short) before the publication? 

 

8 minutes ago, MMM20 said:

In this case, I think the odds are good that some big fund with a ~$50-100mm short decided to exit before earnings and therefore paid Muddy Waters to publish this (during the quiet period). This is quite common and somehow legal, though regulatory changes are apparently in the works right now.

 

This seems plausible and maybe also would explain the quality of the work:)

[UK]

14 minutes ago, MMM20 said:

It might also partially explain the low quality of the work vs. some others we’ve seen from MW.

 

+1:)

[MMM20]

Just now, UK said:

 

+1:)

Sorry, added that before I saw your comment. Same wavelength!

[Thrifty3000]

21 minutes ago, MMM20 said:

Low short interest just means it’s not a highly shorted stock and the borrow cost is probably cheap. In other words, it’s a contrarian short (at least not a crowded one) which is the best kind if you’re proven right.
 

In this case, I think the odds are good that some big fund out there with a ~$50-100mm short decided to exit before earnings and therefore paid Muddy Waters to publish this during the quiet period. This is quite common and somehow legal, though regulatory changes are apparently in the works right now.

It might also partially explain the low quality of the work vs. some others we’ve seen from MW.
 

+1. It’s unusual how little command of the facts Block has when asked to comment on things falling outside the scope of the written report.

 

Imagine if you’re the counterparty sitting on $150 million of losses on your FFH TRS position and you’re worried about FFH reporting a blowout quarter. 
 

What’s it cost to get a guy like Block to pump a short thesis so you can reverse the $150 million loss and exit? $10 million? The ROI is pretty irresistible. Follow that money. (Who are the counterparties now?)

[MMM20]

2 minutes ago, Thrifty3000 said:

+1. It’s unusual how little command of the facts Block has when asked to comment on things falling outside the scope of the written report.

 

Imagine if you’re the counterparty sitting on $150 million of losses on your FFH TRS position and you’re worried about FFH reporting a blowout quarter. 
 

What’s it cost to get a guy like Block to pump a short thesis so you can reverse the $150 million loss and exit? $10 million? The ROI is pretty irresistible. Follow that money. (Who are the counterparties now?)

 

Right. I am not a big conspiracy guy but it's well established that this is common practice nowadays and I think it pretty clearly fits the fact pattern in this case. Maybe I'm wrong.

 

Edited February 9 by MMM20

[sleepydragon]

I have access to short interest data. It seems someone put on big short position after 20231127, and then covered on 20231227. Then resumed shorting (at much smaller size) around 1/17. There’s actually not much shorting now. I suspect MW has a small short position , or if they had a client who co-shorted, that client covered last year.

 

[MMM20]

6 minutes ago, sleepydragon said:

I have access to short interest data. It seems someone put on big short position after 20231127, and then covered on 20231227. Then resumed shorting (at much smaller size) around 1/17. There’s actually not much shorting now. I suspect MW has a small short position , or if they had a client who co-shorted, that client covered last year.

 

 

What's the total dollar amount? And isn't that reported on a pretty long delay? I thought it wasn't so clear and transparent on the Canadian exchanges. Thx.

 

Edited February 9 by MMM20

[racemize]

could they do it via swaps and it not be reported?

[Hoodlum]

15 minutes ago, sleepydragon said:

I have access to short interest data. It seems someone put on big short position after 20231127, and then covered on 20231227. Then resumed shorting (at much smaller size) around 1/17. There’s actually not much shorting now. I suspect MW has a small short position , or if they had a client who co-shorted, that client covered last year.

 

I wonder if the 30 day period of the initial short is typical.  Based on the more recent short, they would cover the morning after the financials are released based on the same 30 day interval. 
 

it is also interesting that FFH is only $20 below where the most recent short was done.  LOL

Edited February 9 by Hoodlum

[Gmthebeau]

46 minutes ago, Spooky said:

 

If you don't know anything about the company why are you even posting here? Please at least bring some analysis to the table if you are going to post.

 

Bitter little man cuz your stock crashed.  Ok, the analysis was 2 times accused of creative accounting just because you don't understand the analysis doesn't make it less useful. 

[Intelligent_Investor]

50 minutes ago, MMM20 said:

Low short interest just means it’s not a highly shorted stock and the borrow cost is probably cheap. In other words, it’s a contrarian short (at least not a crowded one) which is the best kind if you’re proven right.
 

In this case, I think the odds are good that some big fund out there with a ~$50-100mm short decided to exit before earnings and therefore paid Muddy Waters with their big following to publish this during the quiet period. This is quite common and somehow legal, though regulatory changes are apparently in the works right now.

It might also partially explain the low quality of the work vs. some others we’ve seen from MW.
 

Wouldn't that be insider trading if Muddy Waters shorted due to knowing insider info that a large shareholder was selling? That sounds pretty illegal to me

[sleepydragon]

9 minutes ago, MMM20 said:

 

What's the total dollar amount? And isn't that reported on a pretty long delay? I thought it wasn't so clear and transparent on the Canadian exchanges. Thx.

 

Between 1/16-1/22, it peaked at $700m. And then after 1/23. it went down steadily to $100m. Yesterday it “popped” to $130m.

 

there are certain institutional data feed you can get these daily or even hourly.

 

[gfp]

1 minute ago, Intelligent_Investor said:

Wouldn't that be insider trading if Muddy Waters shorted due to knowing insider info that a large shareholder was selling? That sounds pretty illegal to me

 

That's not what "insider information" is.  Material non-public information is about the company itself, not the behavior of other shareholders.

[Hoodlum]

I wonder if MW did this report so that their shorts could get back to their cost, allowing them to get out approx. breakeven or a small profit before the financial.   This was likely a last gasp chance before FFH took off even further from where they initially shorted.

Edited February 9 by Hoodlum

[sleepydragon]

1 minute ago, sleepydragon said:

Between 1/16-1/22, it peaked at $700m. And then after 1/23. it went down steadily to $100m. Yesterday it “popped” to $130m.

 

there are certain institutional data feed you can get these daily or even hourly.

 

Before 11/27, it was less than 60m. After 11/27, it popped to $100-150m. Then back to $50m in 2024 till popping a lot around 1/16

[Malmqky]

7 minutes ago, Gmthebeau said:

 

Bitter little man cuz your stock crashed.  Ok, the analysis was 2 times accused of creative accounting just because you don't understand the analysis doesn't make it less useful. 

Thanks for the positive contribution to this board.

Do you understand the report? It’s kind of a joke. A lot of these “issues” have actually been addressed by Fairfax. I don’t think this is a good faith report by MW…or they’re just misinformed. Guess FFH shouldn’t follow accounting rules..

 

Also not sure why you’re bringing up a situation from two decades ago that was proven to be false.

 

Fairfax isn’t a fraud lol
 

 

Edited February 9 by Malmqky

[Thrifty3000]

If you want to know if a short has teeth take a look at the bonds and preferreds. Example, look what happens to bonds after a Hindenburg hit.

[sleepydragon]

12 minutes ago, racemize said:

could they do it via swaps and it not be reported?

The bank who wrote the swap can cross with other clients a bit, so it won’t show on the market, but that’s for small trades only. if it’s big size, the bank will have to sent that out to the market. 

[MMM20]

"not alleging fraudulent behavior" ... "cherry-picks" ... "standard short-seller playbook"

 

"If we had to guess, Muddy Waters likely covered the bulk of its short position yesterday"

 

These guys get it.

 

 

 

Edited February 9 by MMM20

[ValueMaven]

Bought some more OTC in an account that has had way to much cash ... 

[Spooky]

15 minutes ago, Gmthebeau said:

 

Bitter little man cuz your stock crashed.  Ok, the analysis was 2 times accused of creative accounting just because you don't understand the analysis doesn't make it less useful. 

 

Lol! I'm up significantly on my FFH position, a 10-12% drawdown is nothing. I read the report, I did not find it convincing. There is nothing to address the long term performance of the underlying business to state that it is fundamentally impaired. Still think the company is very cheap here.