One of the most well known and prolific short sellers in the industry, Carson Block of Muddy Waters Capital, has "massively reduced" exposure to short positions in recent days, prompted by the retail buying frenzy that has fueled squeezes in names like Nokia, GameStop and AMC Theaters.
He told Bloomberg on Wednesday: “There are no medals for valor in this business. Being one of the more high-profile short-sellers, it would not be smart for us to have appreciable risk on in any name.”
Block is one of the most well-known names on Wall Street, cutting his teeth by helping to expose a number of frauds - many U.S. listed and China based - over the course of more than a decade. Block was one of the first people to help make the Luckin Coffee short thesis widely available - a thesis that eventually wound up proving true when the company was found to be guilty of massive accounting fraud.
He said he started paring back his positions about two weeks ago when he noticed that a squeeze could be brewing in GSX Techedu, a company his firm has been short, and has been a vocal critic of.
After watching GameStop's run up, Block decided it was time to take more of his firm's short exposure off the table. One name he has covered is Nano-X Imaging, Ltd., which was added to Cathie Wood's ARK Israel Innovation ETF in recent days. He continued: “The mob is specifically hunting short-sellers. We didn’t have the misfortune of being in GameStop.”
The firm was able to "reduce risk in [its] last big position" on Wednesday, Block said. “We expected a retail-buying mania,” Block said. Finally, he commented that the move is to protect his client's capital and that he is not stepping away from short-selling in general.