The U.S. Department of Justice investigated short-selling institutions such as Merkekin, cracked down on malicious short-selling, and justified the names of companies such as FF

Companies such as Faraday Future (FF), which have been maliciously shorted by short-selling agencies such as Megakin, have ushered in good news. A few days ago, the US Department of Justice is collecting information on dozens of investment companies and research institutions suspected of participating in short selling, and has issued subpoenas to some companies and institutions.

In the U.S. Department of Justice's investigation list, not only Muddy Waters Capital, Citron, Marcus Aurelius Value and other short-selling institutions known for doing aerial stocks, but also more than 30 companies and institutions including J Capital Research (MegaKin), Oasis Management, etc.

In this list, J Capital Research (Meiqijin) shorted FF last year, claiming that "FF can't build a car" and saying that FF has financial fraud, which has brought huge losses to FF's stock price. On February 2, an 8-K filing with the U.S. Securities and Exchange Commission (SEC) by a special committee of FF's independent board of directors showed that the allegations in J Capital Research's malicious short-selling report were grossly inaccurate.

The investigation was led by the U.S. Department of Justice's Fraud Division in conjunction with federal prosecutors in Los Angeles. Analysts said the investigation would put a tight spell on short-selling institutions, including Megakin, to help these high-quality companies, including FF, that had been maliciously shorted.

Megakin malicious shorting FF is seriously inaccurate, and FF 91 booking order data is true

Last October, short-selling agency Megakin said in a report on malicious short-selling FF that FF would never sell cars. The short-selling report also indicated that there was financial fraud in FF, which brought huge losses to FF's stock price.

In response to this short report, the FF board of directors deliberately set up a special committee composed of independent directors, with the assistance of independent legal counsel Kirkland & Ellis LLP law firm and independent audit firm Alvarez & Marsal, through several months of internal self-examination, finally showed that FF company information disclosure was correct, clear and transparent, Meiqijin's allegations in the short report were seriously untrue, FF did not carry out financial fraud, and restored Jia Yueting's innocence.

It is understood that the 14,000 FF 91 booking order data released by FF Company is true. The order data contains two types of paid bookings (priority bookings) and unpaid bookings (standard bookings), and the Company has not deliberately misled the intention. The FF team made it clear to all institutional investors during the SPAC IPO roadshow. FF CEO Bi Fukang made it clear to CNBC on the day it went public last July that bookings include paid and "many unpaid bookings."

According to the 8K file submitted by FF to the SEC, it can also be seen that the 25% salary reduction of global CEO Bi Fukang and FF founder Jia Yueting announced in the self-inspection report is only an improvement made by the company at the management level. The 8K document proves that FF has no financial fraud, but only reveals some of the company's processes and corporate management system flaws, FF's former chairman Brian Krolicki therefore assumed the first responsibility to step down, and FF global CEO Dr. Bi Fukang, FF company founder, chief product and user ecology officer Jia Yueting's basic salary was reduced by 25%, directly to the newly appointed executive chairman Susan Swenson.

Industry analysts believe that from the perspective of company development, the management defects that appeared in FF's self-inspection report are a good thing for the future development of FF, and the strengthening of corporate governance will help the company's management to a higher level and is conducive to the company's future development.

Malicious short selling has become a Wall Street "business"

U.S. listed companies have been repeatedly shorted, and behind it is a big business of short-selling institutions. These institutions have gained huge benefits by maliciously shorting.

Last December, hedge fund Sabrepoint Capital was exposed for paying a $9,500 a monthly margin to a researcher in 2018, encouraging him to delve deeper into real estate firm Farmland Partners Inc. Subsequently, the researcher published an article about real estate investment trust Farmland Partners under a pseudonym on the well-known investment information website Seeking Alpha, causing the company's stock price to fall by 39% in a single day and evaporate nearly $115 million in a single day.

For Chinese Internet companies, almost every company is in danger of being shorted. Public information shows that since 2014, COMPANIES SUCH AS JD.COM, Fanhua Financial Holdings, Pinduoduo, Momo, Cheetah, Uxin and other Chinese stocks have been shorted by Wall Street short-selling institutions. In general, these institutions try to profit from falling stock prices by shorting company stocks through baseless allegations and deliberate misinterpretations.

According to Joshua Mitts, a law professor at Columbia University, who examined more than 1,700 reports of anonymous short sellers between 2010 and 2017, these reports contributed to more than $20 billion in stock price mismatches. In addition, Tesla founder Elon Musk has strongly criticized short sellers and short sellers, accusing them of maliciously slandering companies to make a profit. At the beginning of last year, Musk had supported the retail vs. institutional bears. Musk tweeted: "You can't sell a house that doesn't belong to you, you can't sell a car that doesn't belong to you, but you can sell stock that you didn't own!?" This is outrageous, and short selling is a scam. ”

Under the strike hard, the stock prices of companies that were once shorted are expected to recover

Under the severe crackdown of the US SEC and the Ministry of Justice, the stock prices of companies that have been maliciously shorted by short-selling institutions may be expected to return to their previous levels.

In fact, due to the malicious short-selling of short-selling institutions, many retail investors in the United States have been asking regulators to strengthen the supervision of hedge funds for many years, hoping to severely punish malicious short-sellers through legal means. At the behest of investors, the U.S. Securities and Exchange Commission (SEC) and the Justice Department have been tracking hedge funds for "distortion and short-selling" behavior in recent years, that is, publishing misleading and false information to depress the company's stock prices, influence and manipulate market sentiment, and profit significantly from the process.

In response to malicious short-sellers, Joshua MittsMitts, a law professor at Columbia University in the United States, joined forces with more than a dozen other well-known U.S. securities law experts to jointly urge the SEC to establish a more perfect short-term regulatory policy, and if it is found that there are bears who immediately close their positions and profit profits during the period when the negative report is issued, causing the stock price to fall, they are called for "market manipulation".

Wall Street analysts said that with the US Department of Justice and SEC cracking down on malicious short-selling institutions, it is a major positive for U.S. listed companies, which will prevent those short-selling institutions from profiting through malicious short-selling out of nothing. For those listed companies that have been maliciously shorted, their market value will gradually recover.

The analyst said that taking FF as an example, FF has now proved through 8K documents that the short-selling agency's short-selling report against him is out of thin air. With rising fuel prices and the government encouraging consumers to replace internal combustion locomotives with electric vehicles, coupled with the fact that FF 91 is close to mass production deliveries and the company's stable and rapid development at this stage, if FF can deliver FF 91 in July 2022 according to the promised mass production, then the stock price will be further repaired and ushered in a sharp rise. At present, the FF Hanford plant is currently continuing to actively prepare to reach the final milestone of the upcoming third quarter of FF 91 mass production delivery.