Carson Block, the short seller and analyst who sparked a 74 percent drop in Sino-Forest Corp. (TRE) shares when he said the company misstated its business, is finding it harder to attract believers to his latest research.
The 35-year-old lawyer who founded Muddy Waters LLC gained credibility in June when he told investors that Sino-Forest overstated its timber holdings. Block’s reports on Chinese companies shook investors in the world’s fastest-growing major economy and helped erase more than $5 billion of market value. The calls caused losses for John Paulson, the billionaire who got rich betting against subprime mortgages, and former American International Group Inc. Chief Executive Officer Maurice “Hank” Greenberg.
His latest opinions aren’t getting the same reaction. While Focus Media Holding Ltd. (FMCN) sank 39 percent when Muddy Waters said Nov. 21 that the Shanghai-based digital advertiser exaggerated its network, the stock has rebounded 52 percent. Spreadtrum Communications Inc. (SPRD), a chipmaker in Shanghai, traded at $15.67 in New York, from $12.49 on June 28, when Block questioned its revenue. Focus Media and Spreadtrum say the firm’s assertions lack merit.
“Carson pointed at a lot of things, but what seems to be lacking is a present-day smoking gun,” said Eric M. Jackson, founder and managing member of Ironfire Capital, a Naples, Florida-based hedge fund that invests in Chinese stocks. “It’s a tougher job.”
Keep reading: Muddy Waters Losing Support on Latest Calls – Bloomberg.