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Comment by maxpert | Hacker News Reader

Isn’t this the company where some hedge fund published report on and they have a short position? Until there is no 3rd party testing and independent publications verifying their claims I am not buying anything. I know I sound skeptical but I’ve lost enough money on SPACs.

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Yes it is. It is on the front page of Scorpion Capital, "activist short selling focused on publicly traded frauds and promotes".

You can download 188 pages report here. Decide for yourself. https://scorpioncapital.com/

Reads like an episode of Billions

I’m in no position to review the legitimacy of their report on this company, but their review of IonQ’s technology, a field I have a recent PhD in, is pretty bad. They might be right about the SPAC nonsense and the business aspects— I don’t know. However, it’s clear they’re talking out their asses about the technology.

Can you share some criticisms? Because I found IonQ report pretty convincing too.

I know the first author on their uptime report pretty well. He is an honest person. Most of the stuff in this report seems like reasonable concerns (the CEO, Bacon, Preskill, buying from Honeywell) but comparing to Rigetti seems out of place. Quoting from IBM and Google people (some of whom I probably know) seemed a bit much too.

By "their report" here I mean the IonQ one Scorpion cites with 53% uptime.

Audi and VW have been independently testing them.

FWIW last year's activist short presentation[0] dedicated a number of pages to VW, and it seemed that VW mostly wanted the publicity of them doing something sustainable under pressure from German stakeholders (although officially VW declined to comment, and all that info is said to come from employees).

[0] https://scorpioncapital.s3.us-east-2.amazonaws.com/reports/Q...

The mainline autos have been praying for a tech jump to close the gap with Tesla.

Since BMW canned their CEO over EV strategy five years ago, all execs at mainline auto have been on notice and been actively pressured as to EV strategy by major investors.

A go-to strategy was to declare plans, but all the economic scaling of those vehicles seemed to come down to 1) solid state becoming viable and 2) OEM battery building supply.

Toyota has blown the solid state deadline a half dozen times already, even when they were pushing Hydrogen (another canary in the coal mine piece of bullshit from a clueless CEO).

So yes, I agree that solid state investment has just been "investor relations" and "CEO job maintenance" tasks, and nothing that really carries water.

I do think the Tesla battery advantage is in trouble now that the Chinese are ramping key LFP/Sodium Ion production with practical densities that will truly power the mainstream EV that will be far under the drivetrain cost of ICE.

Their track record is pretty terrible.

https://scorpioncapital.com/track-record

Entire port is negative. Not a single short position is turning profit.

The "Big Short" was negative until the market caught up.

I found it odd that they'd publish such a poor track record, so I checked the worst performing position ALLK (-97%). The stock was at 100-ish in December 2019 (their reference), and today it is at 3.22.

Consequently, it seems that the performance that they are reporting is that of the stock, not of their short.

Edit: fixed the reference date.

I didn’t follow that at all. That page shows the change in stock price for the companies, not the unrealized gain/loss from short positions. That doesn’t tell us how their portfolio has performed, but it suggests they have a good track record of calling losers. What am I missing?

It's highlighting just the opposite - that their short calls are prescient. You're seeing it's all negative because they are betting that those stocks will drop.

Those aren't negative results on 'short positions', they're the underlying, i.e. taking the short position was a good call. '[Every] single short position is turning a profit'.

I'd agree that's confusing/ambiguous if it weren't for the S&P comparison. ('If we'd taken an equally valued long position in the S&P 500 instead' would be a weird thing to state.)

That's exactly how you profit from a short position.

If they have a short position doesn't that mean they are financially motivated to see them fail? Doesn't sound like a neutral source.

Yes, they are talking their book. That's why you should decide for yourself.

I see it as a bit of a chicken and egg situation: you see a company you believe is overvalued, therefore you short it. The problem is that once you do that you become financially motivated to see them fail, even if that wasn't true when you originally shorted them.

I agree with the bias, still there isn't a chicken and egg problem in most cases: You do the research before you take the short position, you only publish the research afterwards. If you are a credible investor, the short position follows from the research, not the other way around.

Alternatively, 'their money is where their mouth is'.

They are a serial short seller. That means they need to retain credibility with their reports to keep their business going. That, combined with general skepticism and a fully-disclosed short position, I think should make it quite easy to fairly evaluate their short-report.

Why would they need to retain credibility?

Shorts are their business, if they want to continue to have other investors believe and follow their reports, the reports must be accurate.

They are in the prediction (down) business.

That’s a very generous assessment. You could also consider them to be in the propaganda business, where the mere act of publishing a negative report is more important than the correctness of what’s inside. The latter doesn’t affect their outcomes if the market has already being influenced by the news.

As evidenced by the comment that originated this thread, and currently sits at #1 in this discussion.

You misunderstood parent's point. If you are a serial short seller, you can do "false propaganda" at most once. You can still get things wrong, but you are negatively incentivised to do so because of reputation effects.

I didn't say the report can be false. It just needs to be credible enough to raise the question, mainly to a journalist writing a short article on a 2-hour deadline. The report being challenged by the 1 in 10000 people who actually read it is mostly inconsequential after publishing, when talking about retail investors.

Any claims of correctness / moral righteousness when it comes to short-seller reports, in either direction, will always be fuzzy. It's impossible to avoid the inherent conflict of interest.

Maybe but that’s not where the big money is made. They’d go broke hoping for small movements off low effort journalism. If they got major pieces in the WSJ that could really move the market. But a total scam short seller won’t get that kind of press

There's a big distance between total scam, and low effort take that is incorrect, but not obviously so.

It seems to me you are conflating different types of investors that take short positions:

* What you are describing is a form of market manipulation where somebody will take a short position and then have somebody else publish a hit piece on a company. This type of 'investor' definitely exists, but it's relatively rare because it's fraudulent in essence. The timeframe for this type of scheme is short - often only a few hours or days at most.

* Then there are dedicated short funds. Think of them as the opposite of long funds: they don't believe in an increase in value but a devaluation over time (meaning weeks, months, or years). The "conflict of interest" is not different to a long fund, just in the opposite direction. There is a subtype here that focuses solely on what they perceive are fraudulent companies, think Wirecard, Sino-Forest, Nikola, etc.

* Last but not least every long fund will have some sort of short position, simply to hedge 'against the market'. Say you invest into a certain type of industry, then a typical hedge is to short what you perceive is the weakest company in the industry.

sit down

Still a good counterbalance to the company and its investors, who are similarly not a neutral source.

they only get rewarded for being right, and even then sometimes no reward. short sellers are the investigative journalists of finance

Yes. But that was one that was not well done.

A few people involved in the industry called out a lot of things they said in that report.

The stock price was insane, but most of the criticism they made of the tech doesn't hold much water. You can find a good video about the report on youtube. See TheLimitingFactor detailed video on the report.

Why did you buy the SPACs? Was it because of the charisma of Chamath?

As for me, when Richard Brandson, a brave and crazy man had the idea of making money from space tourism for example, the whole thing just didn’t make sense: if I go to space, I want the spaceship done by an engineer who doesn’t risk his life, but prefers to automate everything first (SpaceX). I like the idea of perfecting rockets using cargo as a business and only _then_ using them for tourism. With that SPAC I got sceptical of all of them.

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