做空十年 A Ten-year Feud

A Review by Squared Pages

Chinese companies listed in the US may now be better prepared for short-selling reports and accusations of fraud after a spate of such “attacks”in the past five years. There is, however, still a lot to learn about the rules of the US capital markets.

So when an industry insider is talking, particularly in the form of an over-400-page book regarding a nearly ten-year-old feud between a short-seller and reputable financial institution, anybody that has an interest in that industry had better listen.

In this case it is David Einhorn, president and co-founder of the hedge fund Greenlight Capital and author of Fooling Some of the People All of the Time: A Long Short Story

The book title comes from the famous quote by Abraham Lincoln.

The feud began in 2002 when Mr. Einhorn made a speech on why he would advise to short-sell Allied Capital, then the second-largest publicly traded BDC (Business Development Company).


Warren Buffett remarked a year later that “it was tough to win” as Allied Capital was defending their “whole ballgame”, while they were just “one position of Greenlight Capital”.

In 2009 when Allied’s position was cleared, Greenlight made profits exceeding $35 million.

What is most intriguing about the book is not how Mr. Einhorn won; rather, it is those moments when it seemed that he was fighting a losing battle.

In the book he depicts how on Wall Street the regulators, media, security underwriters, stock analysts, credit rating agencies, auditors, managers and directors of public companies fail to perform their responsibilities and how change is only galvanized by crises.

The message is sarcastically put by Joel Greenblatt in the Foreword to the book: “In the short run, the good guys may get dragged through the mud and the bad guys may get away with millions. But in the long run, the good guys may get dragged through the mud and the bad guys may get away with millions. ”