Short Seller Who Took Down Samsonite CEO Is Hiring During Virus Crisis

(Bloomberg) --

Blue Orca Capital, the activist short seller founded by Soren Aandahl, has been expanding its team even as the coronavirus pandemic makes some of the firm's on-the-ground research more challenging.

Aandahl, known for targeting luggage-maker Samsonite International SA, has made two hires for his Texas-based firm in recent months. The recruits joined the investment research team in Austin, he said, declining to give further details.

The global health and economic crisis has resulted in steep profit declines, company failures and hiring freezes as businesses struggle to deal with a standstill in economic activity. Recruitment rates have plunged, although there are early signs of the slump bottoming out.

With many employers shying away from hiring, it “creates a little bit of an opportunity for insurgents like our firm, which are smaller, to be an attractive destination for talent,” Aandahl said in a phone interview.

Financial Hiring Gets Tougher in Never-Meet-in-Person Era

Lockdowns have made on-the-ground research such as visiting factories and facilities a little more challenging, Aandahl said. But countries have been shut down at different times, and it's now possible for the due diligence firms that Blue Orca contracts to do research in China, he said.

“For the most part, there hasn't been a ton of change in the way that we work,” he said.

Samsonite, Anta

Aandahl rose in prominence in 2018 when Samsonite's chief executive officer resigned after Blue Orca said he falsified education credentials. Samsonite said at the time that its disclosure of its CEO's educational background had been accurate since the company's initial public offering in 2011.

Last year, Blue Orca targeted Chinese apparel-maker Anta Sports Products Ltd., which vigorously defended itself against the attack and whose shares rose in the months after it. Another report by the short seller sent the stock of Chinese furniture maker Kasen International Holdings Ltd. down more than 90%. Kasen said the report contained “untrue and misleading information.”

Samsonite CEO Quits in Short-Seller Win Over Household Brand

In February, Blue Orca published reports on China Medical System Holdings Ltd., saying it inflated profit and privately enriched its chairman, claims the company strongly denied. China Medical System shares are down about 15% since Blue Orca published its first report.

Fraud at Chinese companies is topical again after revelations at Luckin Coffee Inc., one of China's brightest startups, earlier this year. In the aftermath, the U.S. Senate approved a bill in May that would require companies to certify that they are not under the control of a foreign government or submit to audits from a U.S. accounting agency to determine that.

China's refusal to allow the Public Company Accounting Oversight Board to check audits of firms that trade on U.S. exchanges has long been contentious.

Not Targeted

However, Aandahl said it was a “misconception” that Chinese companies were being targeted.

“The act does not single out Chinese companies for heightened scrutiny,” he said. “But it does ensure that any company, whether they are based in San Francisco, London or Shanghai, adhere to the same standards of oversight and transparency no matter where they are from.”

Aandahl echoed fellow short-seller Carson Block's views on stock valuations globally, saying they are “surreal” and may eventually come down as they don't reflect economic realities and unemployment levels. But with markets propped up by trillions of dollars of central bank stimulus and government aid, it's “a hard macroeconomic environment to make any sort of prediction,” he said.

Still, he argued that the current stock market is positive for short sellers. On one hand, “you'd rather be shorting in a market where valuations are high,” he said. On the other, investors have slightly less risk tolerance, and are more likely to value the kind of due diligence and deep-dive research that Blue Orca provides, he said. The MSCI Asia Pacific Index is down about 10% so far this year, trading at 1.3 times its 12-month forward estimated book value -- close to its five-year average, according to Bloomberg-compiled data.

All in all, Aandahl said the pandemic hasn't had much impact on his firm.

“Everything has changed but nothing has changed at the same time,” he said.