When it comes to permissive exchanges that list anything with a pulse, investors might think about other places than NASDAQ. Just remember the frequency of GMT Research and several others that tweet significant drops on the Hong Kong exchange.
New year, same HK pic.twitter.com/XjyplTXE3A
— MuddyWatersResearch (@muddywatersre) January 3, 2023
Many times, the stocks fall off a cliff without much apparent reason.
Chinese gaming company ZX Inc (https://t.co/kITmdfK84e) losses 75% of its value (or US$3.5bn) in one day on no news... pic.twitter.com/bxSkFc0Y7A
— GMT Research (@GMTResearch) February 2, 2024
London Stock Exchange could also be another example, Sharesprophets are probably the best that could tell stories about similar drops from the various stocks linked mainly to Africa and mining.
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However, it seems NASDAQ has similar stories, and Hindenburg's founder has been tracking the developments over the past two years. The days of China Hustle are seemingly not over, and according to the activist, the exchange has not learned its lesson.
While we continue to track many new campaigns that focus on Chinese-based US-listed companies, there are apparently many other stocks that do not get the same spotlight. They run under the radar, seemingly pump, and then inevitably dump, mimicking the same behavior as some of the Hong Kong stories.
Hindenburg's founder started a thread in November 2022 showcasing such stocks.
This is the kind of nonsense happening on the Nasdaq exchange on a daily basis.
— Nate Anderson (@NateHindenburg) November 7, 2022
Chinese "companies" scamming over and over and over with zero consequence (other than getting away with stealing massive amounts of money).$HUDIpic.twitter.com/hlNT9Ie4Za
Since then, they have profiled five such cases. They quickly followed up the first post with two other cases within just two days and said that these are frequent occurrences.
Today's randomly imploding Nasdaq-listed scam is actually $SGLY, which we have written about extensively.
— Nate Anderson (@NateHindenburg) November 17, 2022
The company has been relentlessly pumped in chatrooms for the past 2 days as scammers dump shares aggressively onto unsuspecting victims. pic.twitter.com/gSF7euMdGo
Singularity Future Technology (SGLY) was targeted by the activist in May of 2022 due to heavy allegations, but the last drop came out of nowhere in November. The stock is now unsurprisingly down 92% since the initial report. After the three initial cases, the activist went to analyze Top Financial Group (TOP). This otherwise sleep microcap woke up in April last year to jump over 1,600%, only to dump quickly after. Hindenburg's founder said that the main culprits behind the trading seem to be pump and dump chatrooms.
The SEC just suspended $TOP.
— Nate Anderson (@NateHindenburg) May 12, 2023
The SEC has acted to prevent a clear fraud while NASDAQ has once again abdicated its role as market gatekeeper, in favor of collecting listing fees.https://t.co/9D0XhAL9N2pic.twitter.com/PSWKvjAWqn
The SEC eventually halted the stock for a few days, but that did not seem to prevent the stock from continuing its antics. The shares skyrocketed in a similar way at least twice after Hindenburg talked about it. The stock jumped 66% in just two days in June of last year, only to lose its gain within a month or so. The latest jump was then caught and publicly discussed by Hindenburg's founder in February of this year.
$TOP hit highs of $7.70 on Friday and closed at $5.39.
— Nate Anderson (@NateHindenburg) February 12, 2024
This morning it announced an offering at $2.50, a ~54% discount to Friday's close.
Shares are predictably crushed today, down 33% so far.
How many times can the same scam be recycled?https://t.co/wTGLKXFSgL
Before the comeback of TOP, the activist talked about two other cases and also said they had seen a dozen others in the span of just a few months last year.
Today’s Nasdaq-listed China scam liquidating for no apparent reason is $CCTG. pic.twitter.com/IHvQ9wVbgy
— Nate Anderson (@NateHindenburg) February 1, 2024
Therefore it seems the situation is unchanged and while meme stocks and short-squeezes are still grabbing people’s attention, it seems the ‘boiler rooms’ adapted to the 21st century and continue to mislead investors.
A critical missing element is how NASDAQ will respond to the often severe allegations made by Hindenburg Research's founder. Given Hindenburg's high-profile nature and the gravity of their claims, we encourage NASDAQ to step in to address these issues. In our view, this would be in line with maintaining market transparency and upholding responsible corporate governance. NASDAQ's recation and any needed intervention could play a crucial role in ensuring that these allegations are thoroughly examined and appropriately managed.
We would also like to say that while Hindenburg highlighted NASDAQ, NYSE might not be far away from a similar reality. The old and venerable stock exchange featured many similar disappointments, such as SOS Ltd., which was also targeted by Hindenburg and is now down more than 99%; we would remind investors about AMTD Digital (HKD), which after its IPO went up over 4,300%, in just two weeks. It is down 72% since the IPO opening price or 99% since the high.
What does all this mean? Well, a simple thing. Activists short-sellers are unlikely to decrease their activity, and we will be here to monitor it.
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