Exposing Jack Ma, Big Pharma, and Chinese Fraud (w/ Carson Block) | Summary and Q&A

TL;DR

Short seller Carson Block explains his role in uncovering fraudulent companies and highlights the importance of exposing immoral practices in the corporate world.

Key Insights

• 🖐️ Activist short sellers play a crucial role in exposing fraudulent companies and unethical practices to protect investors.
• 🍰 Block suggests that short sellers can target companies on moral grounds, highlighting their detrimental effects on society and the financial incentives long investors provide.
• 😨 Health care is a sector where immoral business practices frequently occur, and it presents an opportunity for short sellers to enact change.
• 💉 Block also touches on the broken health care system in the US and the need for broader change in the culture of investing to incorporate moral considerations.

Transcript

CARSON BLOCK: Short selling is a niche. Maybe the universe of potentially good shorts is this big. As an activist short, we are a niche of a niche. So our universe of potentially actionable shorts is that big. So there is this difference. Most shorts-- so non-activist shorts-- are out there looking for companies that are melting ice cubes or where ... Read More

Questions & Answers

Q: What differentiates activist short sellers from non-activist shorts?

Activist short sellers specialize in uncovering frauds, promotions, and financially engineered companies that deliberately hide information from investors. They focus on explaining the true nature of a company's operations and financials.

Q: How has Carson Block's strategy evolved over time?

Block states that different activist short sellers have different approaches. He personally focuses on finding companies that seem too good to be true, with a lot of fanfare and divergence between GAAP and non-GAAP earnings. His strategy involves extensive transcript analysis and looking for signs of misconduct or promotional behavior by management.

Q: What are the potential risks associated with shorting a company like Manulife?

Block explains the risks associated with shorting Manulife, including the uncertainty surrounding a trial that could potentially put significant pressure on the company's balance sheet and capital. He highlights the timing of a new regulation introduced by the Saskatchewan Provincial government as suspicious and potentially impacting the outcome of the trial.

Q: How does Carson Block determine when a company is worth shorting for moral reasons?

Block argues that companies involved in fraudulent activities that harm society, such as pharmaceutical firms overprescribing addictive opioids or insurers providing inadequate coverage, should be targeted by activist short sellers. He believes that long investors who continue to support such companies are complicit in enabling immoral behaviors.

Summary & Key Takeaways

• Carson Block discusses the niche of activist short selling, which focuses on uncovering fraud and unethical practices in companies.

• He emphasizes the role of short sellers in providing transparency and protecting investors from companies that hide the truth about their financials and operations.

• Block explains that his approach involves looking backward and proving fraudulent activities that have already occurred, rather than predicting future events.