- Short-seller Carson Block is moving his hedge fund to New York, and says he wants to add to his seven-person strong team.
- A source close to the fund told Business Insider that Block’s Muddy Waters hedge fund is up about 12% this year. He also crushed it last year.
- 2019 marks a year where Block has “giving a lot of thought to how to communicate often complex concepts, in a way that keeps the audience engaged.”
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Short seller Carson Block has had quite a year.
In an equity bull market that has been brutal on short sellers, a source told Business Insider that Block’s Muddy Waters Capital fund is up about 12% for the year to November, outpacing the 8.6% average gain for hedge funds so far in 2019. His fund was up last year, too, in a particularly hard year for hedge funds.
Now, he’s looking to expand. He is planning to move offices in the summer from San Francisco to New York and add about three more hires.
“We’re looking to add strategies where they make sense,” Block told Business Insider in an interview. “The selling point is our culture,” which he describes as activist-minded and tight-knit, with a knack for “looking at the world through a contrarian lens.”
Block wants applicants who are “very sophisticated, anti-establishment,” and “oddball people” to join his seven-strong team at Muddy Waters.
“There’s a real ‘Moneyball’ type thesis on talent in the investment industry,” he said, referring to the 2003 Michael Lewis book about a baseball coach who uses a mathematical system to outsmart teams in recruiting players. “Certain things are greatly overvalued — appearance, pedigree. The sell-side has consolidated, its become a lot more button-down and boring. There are people who don’t fit in, who can’t talk about sports, these are people who are overlooked and undervalued.”
“Not to say that we’re not a home for someone who has a pedigree and does look the part, but I’m most interested in finding people who for some reason don’t fit in with the highly institutionalized world.”
“The ultimate person that we’re looking for is probably working at large firm and doesn’t get that much attention,” he said. “That’s one of the types of people we’d like to identify.”
The hiring goals align with a shift in Block’s messaging lately. Activist short sellers bet against a stock, then typically release a report criticizing the company, banking that their arguments will compel investors to sell. If the stock goes down, the short seller profits.
But in a media landscape dominated by Twitter, TikTok, and Instagram, Block said he’s rethinking that process — “giving a lot of thought to how to communicate often complex concepts, in a way that keeps the audience engaged.”
Faux ceremony with Stormy Daniels
Case in point: Earlier this month, he co-hosted a faux awards ceremony with adult actress Stormy Daniels, called “The Fidouchies,” which made “serious points in a non-serious way.”
It was raunchy, Business Insider’s Bradley Saacks wrote after the event, chock full of f-bombs, flying dildos, and expletive-laden barbs aimed at corporate titans including Elon Musk and Larry Fink.
It’s not the only big change this year.
Showing, not telling
In Europe, dogged by persecution of short sellers, Block lets his trades do the talking. In June, Muddy Waters put a $6.7 million short bet on Solutions 30, a French IT company. The position was disclosed via a regulatory filing, which was enough to send the shares tumbling.
But, unusually, the disclosure wasn’t accompanied by a critical report, or any criticism at all, from Block.
It was a clever way of avoiding critics by letting his trades do the talking. Block told Business Insider at the time: “By showing we’re short, we hoped the smart money” would do its homework, and find “some of the same issues we did.”
Also this year, Block posted on the fund’s website a 12-minute documentary detailing his criticism of French retailer Casino, which examines the fund’s battle against the company and French regulators after shorting Casino’s shares back in 2015.
Fake swag bag
Another example: He trolls companies on YouTube. Block last month posted on a video of a Muddy Waters staffer pranking partygoers on their way into a 10th anniversary party for Burford Capital.
Guests received mock swag bags that included a “margin-call stress ball” and a “Burford creative writing and accounting pad.” Block has said he shorted Burford, a London-listed litigation finance firm, because of questionable accounting. Burford has denied the claims.
The new tactics are his evolving form of activism, he says. As young people flock to the start-up scene amid a loss in cache among finance firms, Block says there’s a place at Muddy Waters for those who want to make a difference.
“I’m best equipped to clean up problems,” he said. “I grew up in capital markets — my fund functions well for the business that I’m in. The capital markets are the best place for me to be an activist.”