Management Follow-Up: When Short Attacks Meet Due Diligence

'Crisis Investing' Alert

In our last monthly issue, we analyzed a coordinated short seller attack against one of our recent recommendations and promised subscribers we would follow up directly with management to get concrete answers to the key questions raised.

Now, these situations require careful analysis.

Because when a company you’ve recommended gets hit by a professional short selling campaign, it presents both a challenge and an opportunity. The challenge is obvious—watching a position drop double digits in days tests any investor’s resolve. The opportunity is less obvious but potentially more valuable: when management answers and hits near-term milestones, uncertainty lifts, shorts cover, and the result can be a sharp re-pricing to new highs.

Short sellers profit from price declines, creating a direct financial incentive to publish reports that will cause stocks to fall. This isn’t necessarily improper—legitimate short sellers provide valuable market function by identifying overvalued companies and fraud. Doug Casey himself has spoken favorably of short selling as a market mechanism.

But many short sellers also thrive on fear and confusion, blending real concerns with inflammatory language meant to spark panic selling.

Our job is to separate signal from noise, address valid criticisms head-on, and determine whether the underlying investment thesis remains intact.

That’s why, when situations like this arise, we call management directly, have detailed conversations, and then follow up in writing with more questions.

This alert documents what that approach revealed in this case. I’d originally planned to run it in Tuesday’s monthly issue, but it’s long and time-sensitive—so I’m sending it today, Sunday, so you have it before the new trading week begins.