Hedge fund high roller John Paulson has taken some lumps on a Chinese reverse merger stock. But he seems to be dealing with it better than some people.
Paulson's fund filed this week to say it sold all the shares of Sino-Forest (SNOFF) it has bought over the past three-plus years, booking a loss estimated at $700 million. The stock has plunged 91% this year, mostly after a short-seller, Carson Block of Muddy Waters Research, published a report contending the company's books were cooked.
Paulson told Bloomberg he sold the stock "due to the uncertainty over Sino-Forest's public disclosures and financial statements." The company has appointed an independent commission to check the Muddy Waters claims, though there seems to be little doubt that the company has been playing fast and loose with the facts.
The loss is a black eye for Paulson, who made billions betting against the housing market during the bubble but has since had mixed results. His funds have been losing money as his wager on a U.S. recovery, via bank stocks, has gone into the red.
But many others have lost money in the Chinese reverse merger stocks that have been exposed as frauds this year, and you get the idea that some of them aren't taking those losses as maturely as Paulson seems to be.
For instance, some wag on Tuesday published a fake press release purporting to announce a Securities and Exchange Commission lawsuit against Block and Muddy Waters, claiming they manipulated the shares of Sino-Forest, Duoyuan Water (DGW) and Orient Paper (ONP).
The release was obviously a hoax, full of unsubstantiated claims and amateurish grammar and punctuation errors. But that didn't stop it from getting picked up on the Zero Hedge blog, which naturally ran with the idea that in "Communist Amerika" the securities regulators sue the guy who exposes the fraud, not the actual fraudster. Life is hard at the hedge funds.
The SEC declined to comment and BriefingWire didn't return an email seeking comment. Block, who lives in Hong Kong, issued his own statement saying Briefing Wire had "agreed to remove the libelous submission."
Though the hoax obviously getting some attention, it didn't succeed in the way you might assume its authors intended, by causing the mentioned stocks to rise (and presumably saddle Block with losses): Orient Paper shares fell 1% in early trading and Sino-Forest tumbled 21%.
The biggest loser in the latest apparent Chinese reverse merger fraud is John Paulson.
Paulson, the hedge fund manager who made billions betting against the housing market at the end of the bubble, is the biggest shareholder of a company called Sino-Forest (SNOFF). That stock lost two-thirds of its value this week, including 17% Friday, after a short-seller released a report claiming the company was a fraud.
The selloff leaves Paulson, whose firm held MOREColin Barr - Jun 3, 2011 12:42 PM ET
Almost three years after Hank Paulson first brandished his bazooka, the sight of Fannie and Freddie debt is still giving people the yips.
The government unveiled a plan Friday that it said will result in the eventual wind-down of the government-backed mortgage companies. Officials stressed that the process will take years, and Treasury Secretary Tim Geithner went out of his way to say the administration will in the meantime stand behind MOREColin Barr - Feb 11, 2011 2:35 PM ET
Taxpayers aren't the only ones benefiting from the recovery at Citigroup.
Hedge fund manager John Paulson has made $1 billion on his bet on Citi (C), he said in his year-end letter to investors. Paulson, who made a fortune betting on the collapse of the housing bubble, started betting on big U.S. banks in mid-2009.
At the time, few people were banking on any economic recovery, even one as weak as this one, which MOREColin Barr - Jan 25, 2011 10:06 AM ET
Saving money can't buy TARP love.
The Troubled Asset Relief Program winds down Sunday. TARP will continue to collect dividends and repayments but won't extend any new loans.
The end comes two years after Congress gave Treasury $700 billion to spend at its discretion to prop up troubled financial giants like Citigroup (C) and Bank of America (BAC), and prevent an economic collapse.
By all accounts the collapse was forestalled, and the big banks MOREColin Barr - Oct 1, 2010 1:09 PM ET
John Paulson still likes the banks, particularly Bank of America.
Paulson, the hedge fund manager who came to fame with a timely bet against the housing bubble, has lately been playing a recovery in bank stocks. Particularly noteworthy was a big purchase last year of Bank of America (BAC) stock.
A filing Monday afternoon shows Paulson increased that bet in the first quarter by acquiring an additional 16 million shares of the MOREColin Barr - May 17, 2010 5:36 PM ET
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