The Adler scandal shows that short sales have a warning function

Logo of the real estate group Adler

Only the warning of the short seller Fraser Perring alarmed the small investors.

(Photo: imago images/Bihlmayerfotografie)

new York Short sellers have a bad reputation. They are seen as the dark forces of finance, betting on stocks falling and badmouthing companies. Many investors believe that. Elon Musk, for example. “You can’t sell cars you don’t own. But you can sell stocks you don’t own! This is bullshit,” the Tesla founder tweeted.

The example of Adler shows how wrong Musk is. The company has long had a bad reputation among real estate experts. But it was not until October 2021 that short seller Fraser Perring warned small investors about the machinations of the group.

Adler denied all allegations. Half a year later, it turns out that the annual auditor KPMG refused to approve the balance sheet because Adler had concealed important connections.

Yes, short sellers do not own the stocks they are speculating on. Only: This also applies to other investors who trade in derivatives. Many funds also only synthetically replicate share prices without owning the shares.

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Yes, short sellers communicate one-way. They limit themselves to the risks of a business model. Alone: ​​companies don’t act differently – just the other way around, as every PR consultant confirms. Of course, they also provide information in a highly selective manner, emphasizing the most positive numbers. Short-seller findings, often the result of months of research, are indispensable as a corrective.

And, yes, short sellers can get it wrong. In the case of the leasing company Grenke and the electric truck manufacturer Nikola, they overshot the mark. But even in these cases, their criticism has led to self-cleansing processes. In fact, to date there has not been a case of a perfectly healthy, clean company that was sent into bankruptcy by evil short sellers.

So who should responsible investors trust: corporate PR or the short sellers? The answer is trivial: blind to no one. Rather, investors should obtain comprehensive information before forming a judgment.

More: The Adler case: The fear of a second Wirecard

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