1 week ago
Evergrande Collapse Highlights Short-Selling Risks, Andrew Left Says
Andrew Left warned years ago that Evergrande was financially unsafe.
But the company’s stock rose sharply after his warning, showing that a correct prediction can take a long time to come true.
Evergrande later failed to repay a huge amount of debt.
Chinese regulators said the company had overstated its revenue and profits in 2019 and 2020.
Its founder, Hui Ka Yan, was sentenced to life in prison in Shenzhen.
Hui’s companies were also fined billions of yuan, and his assets will be confiscated.
Evergrande’s shares eventually lost more than 99% of their value from their highest point.
Left said he did not feel happy about Hui receiving a prison sentence.
Andrew Left said Evergrande’s rise after his warning showed that being right and early are different trades.
Left was fined HK$1.6 million and banned from trading in Hong Kong for five years in 2016.
Evergrande founder Hui Ka Yan received a life sentence alongside 56 associates in Shenzhen.
The court ordered asset confiscations and combined fines of 15.82 billion yuan for Hui’s companies.
Evergrande shares fell more than 99% from their 2017 peak before being delisted, erasing about $50 billion in market value.
- Who
- Evergrande founder Hui Ka Yan, 56 associates, and US short-seller Andrew Left.
- What
- Hui received a life sentence, while Left said the company’s collapse demonstrated the risks of short selling.
- Where
- Hui’s sentencing took place in a Shenzhen court; Left’s trading ban concerned Hong Kong.
- When
- Hui was sentenced on Thursday; Left was fined and banned in 2016, and Evergrande was delisted last year.
- Why
- The court cited the exceptionally large amount involved, particularly heinous circumstances, severe economic losses, and grave social harm; regulators also said Evergrande inflated its 2019 and 2020 revenue and profits.
Andrew Left's view
Regulators and court's view
Left's Evergrande warning
Andrew Left's view
Left said Evergrande was a 'house of cards' and argued that the stock's subsequent rise showed the danger of being correct too early.
Regulators and court's view
Hong Kong's Securities and Futures Commission accused Left of making reckless allegations and market misconduct in a 2012 report.
Hui Ka Yan's punishment
Andrew Left's view
Left said he never wanted Hui or anyone else to receive a prison sentence and found the outcome unsatisfying.
Regulators and court's view
The court imposed a life sentence, citing the exceptionally large amount involved, severe economic losses, and grave social harm.
Key facts
- Hui Ka Yan's sentence
- Life imprisonment
- Associates sentenced
- 56, including his sons Xu Zhijian and Xu Tenghe
- Company fines
- 15.82 billion yuan, or about $2.4 billion
- Left's Hong Kong penalty
- HK$1.6 million fine and a five-year trading ban
- Share decline
- More than 99% from Evergrande's 2017 peak
- Market value erased
- About $50 billion
- Left's US case
- He was found guilty of securities fraud in June and is awaiting sentencing after post-trial proceedings.
Quotes
Andrew Left
US short-seller and founder of Citron Research
“"Evergrande went up roughly 500% after I called it a house of cards, and being right and being early aren’t the same trade, and a stock can stay irrational longer than anyone’s conviction lasts."”
livemint.com
Sources
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