In an unusual departure, a group of internet hackers best known for its online activism has apparently become a short-selling hedge fund similar to Muddy Waters.
Using the name Anonymous Analytics, the group published a 38-page report on Chaoda Modern Agriculture last week that claimed to provide evidence of “one of the Hong Kong exchange’s largest and longest running frauds”.
The report is prefaced with a legalistic disclaimer and, unusually for an activist group, states that it will profit from any collapse in Chaoda’s share price: “You should assume that as of the publication date [September 26] our associates, partners, affiliates, consultants, clients and other related parties hold short positions in the securities or derivative of securities profiled in this report. You should further assume we have an indirect interest in these positions and stand to gain from a decline in the share price of these securities.”
The best that can be said at this point is that Anonymous Analytics is a secretive trading syndicate that is seeking to profit from the publication of damaging speculation about a public company — while at the same time claiming to promote “access to information, free speech and transparency”.
The problem with such cloak-and-dagger outfits is that it is impossible to tell if they really are what they say they are.
Some of the group’s claims seem dubious. It says on its website that it is “acquiring information through unconventional means”, which might suggest that teams of hackers are using their skills to ferret out corruption, but the report itself is remarkably conventional — the seemingly well-researched product of “analysts, forensic accountants, statisticians, computer experts and lawyers”, rather than the work of a bunch of hackers with access to internal documents and emails.
Indeed, the report draws entirely on publicly available information, citing a series of resignations by auditors and independent directors, gross margins that are suspiciously consistent and much higher than the industry average, and, at the same time, capital expenditure that is reportedly higher than even its much smaller competitors.
To be sure, Anonymous’s work highlights some concerning issues at Chaoda (whose shares were suspended from trading a week ago amid separate allegations of insider trading by several executives), but there is no smoking gun contained in its report.
The group claims to share a common cause with the Occupy Wall Street protesters, but has expressed dissatisfaction with the effectiveness of such direct action.
“Unfortunately picketing or rallies or threats can have a muted impact,” the group said in an email interview with the Financial Times last Thursday. “But when you target a company’s share price, suddenly the message gets heard really quick. And it can be very effective.”
Perhaps. But such tactics open the door to precisely the kind of corruption that Anonymous claims to be targeting. How can a group that describes itself as a “decentralised network of individuals” exert any control over the personal trading activity of its members, or indeed any control over whom they choose to share such information with?
After all, many of the people involved are clearly industry professionals with ample opportunity to make personal gains from the information they are party to, which has the potential to undermine the group’s motives — and there is certainly some evidence of that.
The Occupy Wall Street protesters camped out at Liberty Plaza, for example, are directing their ire at the wealthy few who control a huge chunk of the world’s financial assets. Given the agenda, a Chinese agricultural firm is hardly the most obvious target. Sure, every journey starts with a single step, but it’s a long way from Fujian to the heart of the global financial system.
More to the point, publishing unproven slurs against Chaoda is far more likely to hurt middle-class investors than the executives at the top of the tree — especially in a city where the middle classes are heavily invested in the stock exchange.
Yes, corruption is obviously wrong and certainly deserves to be exposed, but profiting at the expense of mom-and-pop investors hardly seems an unambiguously moral act. Indeed, it could be seen as precisely the kind of amoral profiteering that the Occupy Wall Street demonstrators are railing against.
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