Andrew Left, founder and chief executive of Citron Research, will be legally allowed to re-enter Hong Kong’s financial industry next month after he was first banned five years ago for predicting Evergrande’s downfall.
In 2012, Andrew Left published a 57-page report claiming that China Evergrande was «insolvent», engaging in «fraudulent, aggressive accounting» and «will be severely challenged from a liquidity perspective».
Although Left made $1.6 million in profits after a share price drop, he was subsequently banned from the industry by the Securities and Futures Commission (SFC) over what it called recklessness and negligence for disseminating false or misleading information.
Left challenged regulators in court but to no avail after a seven-year civil case that cost him millions of dollars in legal fees.
«Hong Kong’s Attempt to Stifle the Truth»
The Market Misconduct Tribunal – an independent that reviews cases of market misconduct including insider trading and market manipulation – at the time noted that the «great majority of Hong Kong market analysts were bullish as to Evergrande’s prospects».
«I got a complete black mark on me for saying everything that’s already turned out to be true,» Left said in an interview with «Institutional Investor» last month, adding that he had presented evidence of nationwide protests – an issue that has once again reportedly emerged in mainland China.
«It’s Hong Kong’s attempt to stifle the truth. They knew it was going to happen, but they didn’t need a short seller to say anything about it.»
Real Negligence
Although markets has recently joined to place doubts over liquidity issues at Evergrande, Left said he did not feel «great» watching the news unfold, adding that he’s «never been in a situation before where people congratulate you and you’ve got nothing from it» in a separate report with «CNBC» last week.
What’s more, he questioned regulators' consistency on the definition of being negligent.
«And if I was [being negligent], are they going to bring charges against every investment bank who has a $30 target on the stock who have generated huge banking fees while not looking at the obvious?» Left asked. «That is negligent.»
Not a Lehman Moment
Although Left says that Evergrande’s equity is «worthless» and its bonds are «questionable», he believes that the crisis will not evolve to a «Lehman moment».
«Chinese banks will take a manageable hit and the people will have a landing helped by the government,» he said.
«I do believe this is not systemic and will not affect future investments in China or Hong Kong. I think the tech sector regulation is a lot scarier than this.»
