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Absolute Return Podcast #32: The Anatomy of a Short Squeeze

By September 23, 2019 No Comments


September 23, 2019—Blackstone Acquires Dream Global REIT in $6.2 Billion Real Estate Deal. What Makes this Deal so Interesting?

Attack on Saudi Oil Infrastructure Takes 5% of Global Production Offline. What are the Implications?

WeWork Delays its Highly Controversial IPO. Why Did it Flop?

A Divided Fed Cuts Interest Rates as the Stock Market Nears New Highs. Why Were Some Members Against the Rate Cut?

A Discussion of the Great Short Squeeze of 2019

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Transcript

Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by accelerate financial technologies. Accelerate because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: Welcome, ladies and gents, to Episode 32 of the Absolute Return Podcast. This is September 19th, 2019. I am your host, Julian Klymochko.

Michael Kesslering: And I am Michael Kesslering.

Julian Klymochko: We have a number of interesting events that happen in the markets this week that we are going to talk about in pretty good detail.

    • Firstly, we are going to talk about a big real estate M&A transaction with Blackstone acquiring Canadian Real Estate Investment Trust, Dream Global in a six point two billion dollar deal. We are going to chat about what makes this deal specifically so interesting.
    • Really, really, interesting news, in the oil and energy space with a big attack last Sunday on Saudi oil infrastructure, which took out 5 percent of global production. What are the major implications of this?
    • We are going to chat about WeWork, a little bit more and how they delayed their highly controversial IPO. Why did this deal flop?
    • Also going to talk about the Fed cutting rates this week and they even did that as unemployment is near an all-time low and the stock market is near an all-time high. Why were some of the Fed members against this rate cut?
    • Lastly, we are going to have a discussion of the great short squeeze of 2019.

Want to get to some M&A news, some merger and acquisition activity in the real estate sector with Blackstone, the big private equity firm. They announced the friendly acquisition of Canadian Real Estate Investment Trust, Dream Global in a six point two billion dollar deal inclusive of debt. Now, this deal represented a premium of about eighteen point five percent above Dream Global REITs, unaffected share price. Some background on dream global. They own a high quality and diversified portfolio of office and logistic assets, primarily in Western Europe. They have assembled this asset base over the past eight years. They are a relatively new company formed after the global financial crisis. This real estate trust, it was formerly known as Dundee International REIT. It started out by acquiring properties leased to Deutsche Post in Germany and this was Germany’s post office. Over time, they agreed to focus on properties primarily based in Germany and the Netherlands. This is not Blackstone’s first foray into Canadian REITs.

In early 2018, the private equity firm acquired Pure Industrial REIT, another publicly traded Canadian Real Estate Investment Trust. This one own industrial properties across Canada and select U.S. markets, whose tenants included IKEA Distribution Services and FedEx. Iwanted to touch on valuation, they acquired a Dream Global for slight premium to net asset value. I believe about 15 and a half times funds flow and close to 18 times adjusted funds flow, which is really pretty average multiple in terms of takeovers in the REIT space. I believe the capitalization rate was roughly seven (7) percent, which is the net operating income over the total enterprise value. Looking at it from our merger arbitrage’s perspective. This stock, Dream Global stock will trade at a discount to the takeover price so there will be a merger spread which accounts for the risk of the deal not closing. Now, this spread is at roughly 6 percent annualized yield, which implies a 92 percent chance of success. In my opinion, that’s a relatively attractive merger arbitrage spread. I view this as a low risk deal with a high chance of closing. I think 92 percent chance of closing missed prices it. It deserves to be higher and the yield should probably be lower a decent chance for merger arbitrage is to get into this one.

Some background on the parent company and ultimately the entrepreneur behind Dream, which encapsulates a number of entities. Dream Global REIT was just one of them started by Michael Cooper, who is the CEO of Dream Unlimited, who actually had a management agreement. They effectively managed Dream Global REIT. It was externally managed by Dream Unlimited. It is an interesting quote from Dream Unlimited CEO Michael Cooper stated that public companies are not trading well enough to issue equity to buy assets at today’s market prices.

What he is saying with this quote is that with so much demand publicly traded real estate trusts have a harder time competing for key commercial properties. What really struck me about this quote here is he is saying look I am going to get into more private market stuff because the publicly traded REITs, they are now trading at discounted valuations to private assets. Where private equity and other private capital firms are acquiring these non-publicly traded assets, which is interesting because historically private assets have traded at discounts to liquid public market entities. You have seen that relationship flip-flop over the past number of years. It happened really, really recently and why the implications of that are so great is typically the main pitch for private market investing was the so-called illiquidity premium, which refers to the premium return that you would earn for owning private market assets. The reason that you in fact earn that premium return is that you were able to buy these assets at a discounted multiple. That is effectively where this illiquidity premium comes from. The discounted valuation in which you could historically buy private market assets. Now that relationship has flipped, where private market assets are actually trading at a premium to public market real estate entities and we see that in other private businesses as well. It is an interesting dynamic. What are your thoughts on this big Blackstone acquisition here?

Michael Kesslering: Yeah. First of all, I just wanted to go back with something that you brought up being the external management agreement. So Blackstone, it will actually pay Dream Unlimited three hundred and ninety five million dollars to end the contract, which is when you think about it, you know, over 10 percent of the actual deal value in cash. So these are very material contracts and very profitable for Dream Unlimited. I do believe they do have another one for Dream Industrial.

Julian Klymochko: Certainly, in that management agreement would include an annual management fee just for managing the trust. In addition, they earn additional fees such as acquisition fees if they buy more properties, they will take typically take a cut of that as well. It is a relatively lucrative fee and that is why Dream Unlimited, the manager, is earning hundreds of millions of dollars by selling it.

Michael Kesslering: Absolutely. Why I wanted to bring that up is when you had mention the real relatively high cost of capital for these public REITs versus some of their private comparable is that before the acquisition, Dream Global was trading at about a 15 percent discount to their NAV. So like you mentioned, it just makes it very difficult for them to issue shares when you are trading below NAV and just makes you less competitive in the market for acquiring new properties. Now, that is actually a lot less of a discount than their parent company Dream Unlimited is trading at, so CIBC pointed out recently that they have traded at an average 47 percent discount to NAV over the last four years and have traded at as much of a 60 percent discount and really what their NAV is, is mostly holdings in some of these REITs that you had mentioned. Dream Industrial, Dream Global these are publicly liquid positions that they have for the most part in their portfolio as well as these management contracts. It is quite interesting that they would trade at such a large discount. It is understandable why there is some frustration when trading at such a discount when you look at your private market players that don’t have quite as much of that issue.

Julian Klymochko: Right and it is not so much of a discount anymore, because I believe Dream Unlimited stock rallied north of 20 percent on this deal. They also now have a big chunk of cash with a few hundred million coming into the Treasury from selling this management contract and certainly very good lucrative deal for Dream Unlimited and Dream Global REIT shareholders getting a slight premium to that. They have to be happy about that. I just wanted to reiterate the interesting dynamic that we continue to see the divergence between private and public market assets where that relationship it has flipped on its head. You are seeing premium valuations for private market assets, really how money has flooded the space. The reason I think that money has flooded the space is due to their mark to model accounting in the private sector. Their private market assets, they effectively mark their assets on a quarterly basis based on valuations and they can effectively make it whatever they want.

So ultimately, investors get to be oblivious to the daily mark to market swings and that freaks a lot of investors out in the public markets is having that much volatility. It really scares people. On the private markets, investors get to be oblivious to that, pretend like it’s not there because their assets aren’t getting marked to market every day, but they are still incredibly volatile. It is just like you own a house no one is telling you, different bids and offers on your house each day, how it’s swinging around in value, which theoretically it could be if you had it as a marketable asset. As a private entity, you can just be oblivious to that. It has the effect of sort of artificially smoothing returns, which unfortunately public markets don’t get. Public markets get to deal with, you know, the daily mark to market of thousands or tens of thousands of investors putting on their independent views of those positions so it’s a really, interesting dynamic that investors should take into account. The other thing that I wanted to mention, cool, fun fact about Blackstone is they are actually the largest real estate owner in the world.

Michael Kesslering: Absolutely. One last thing with regards to the daily volatility that you see in public markets is the Dream Global REIT Investors actually have been rewarded with that volatility as over the last five years. They have compounded at an 8 percent or 18 percent annualized rate. So very healthy returns if you can smooth out the day to day.

Julian Klymochko: Right. Right. Interesting geopolitical news in the energy space with a big attack on Saudi oil infrastructure. This actually took about 5 percent of global production offline. Oil prices soared on the news Sunday night. They are up as much as 20 percent, Brent crude futures after these attacks on key oil infrastructure in Saudi Arabia and took out roughly five point seven million barrels of oil production. This was actually the biggest jump in oil prices since 1990, which would have been in other Gulf War when Iraq, you know, there is that war going on there. What happened was there was actually a drone attack on an oil processing facility and an oil field, which really disrupted pretty much half of Saudi Arabia’s oil production. Five percent of global supply, which was obviously a massive shock to the system, which is why we saw oil prices rally so much. However, oil gave back about half of its gains this week as the Saudis indicated they would have production restored by month end. I believe that they already restored about 50 percent of lost production. They are on this pretty quick and, you know, I saw pictures of the damage. It does not look like it is too extensive. You know, they had some small missile attacks on some of their infrastructure there.

Nonetheless, the U.S. has blamed Iran for the attack. Some Houthi militias in Yemen have claimed responsibility for it and Iran has actually denied any involvement. Interesting quote from a gentleman named Andy Hall. Andy Hall is actually one of the most successful oil traders of all time and is former hedge fund manager. Prior to that, the firm he worked at, he was infamous for earning one hundred million dollar bonus in one year from his successful trades. He stated, “This attack underscores the vulnerability of oil production facilities in the Middle East. It would seem that oil market needs to not only price in the current supply laws, but also a higher risk premium for the future”. An unabashed bull Andy Hall thinks prices are going higher.

Another interesting aspect to this as these attacks came, as the state owned Saudi Arabian Oil Co. known as Aramco is pursuing an IPO, an initial public offering. They are hoping to raise as much as 100 billion dollars, which would be the biggest IPO ever. Some people thought that with this attack on their oil infrastructure, this would take them out of the market. Now they still plan on pushing forward with this IPO. Some price action on this rally in oil prices, although pretty much half of it has been given back. Oil stocks did rally quite a bit. I saw a number of double digits. Now, what are your thoughts on interesting news in the energy sector here?

Michael Kesslering: The other interesting stat that I saw about this, this issue was that the processing centre that was attacked actually prepared 70 percent of the Saudi crude oil for export, which is quite an interesting stat. You know, really, the Saudis, they had indicated that even in the short term, even though they will be able to bring the supply on by month end that they had indicated that they would be willing to supply the shortfall from their oil storage as well as bring some spare production on stream just to maintain exports. They really were able to come in and really calm the markets. Like you had mentioned, there was extreme volatility over the weekend but really, you have those gains have been given back since. So I really, you know, personally just kind of see this as a short term supply issue, nothing that’s going to change the demand side of the equation. So really anything in terms of something like that, it is just going to be short lived. It really is not going to be sustainable either way.

Julian Klymochko: Right. Right. You’re already seeing a supply response. Alberta Premier, Jason Kenney indicating that the province of Alberta will allow production to be increased with this. The other interesting aspect that investors need to consider is that Saudi; they are not necessarily the swing producer anymore that baton has been handed off to the U.S. with the advent of shale production. I mean, U.S. oil production has risen by, let us call it, four to five million barrels per day in ten north of 10 million barrels per day with the emergence of shale oil like the Permian oil field in Texas is producing just tons of oil, they have so much oil. West Texas Intermediate continues to trade at a big discount to Brent Oil, the big global benchmark. So there really is a glut of oil in North America and it’s been like that for a while. These shale oil guys in the US can put production online fairly quickly. I’m not too concerned about the supply response. As we discussed, we expect the Saudis supply they indicated it is going to come back online within a couple of weeks so bottom line for me, my advice is to fade this rally. I think that it’s coming back down to pretty much where it was initially. If you are holding entities, energy stocks that have rallied, probably a good idea to take some profits on those or if you don’t have profits then take the tax loss.

Continuing our discussion of WeWork the office leasing company, we have discussed them and their controversial proposed IPO on the podcast before. What happened recently is that WeWork has actually delayed its initial public offering after suffering muted investor demand amidst a pushback over numerous corporate governance issues, which we have touched on in the past. In addition to questions regarding the sustainability of its business model. We have chatted about this before. They are growing revenue very, very rapidly, but their losses are really spiralling out of control. Now WeWork was pursuing a valuation in their IPO rumoured to be as low or they dropped it down to as low as 10 to 15 billion, which was really a massive discount to its last financing round, which was at a forty seven billion valuation when this IPO news initially started to come out a few months ago. Investment banks were initially pitching a sixty-five billion dollar valuation, so that has dropped about 80 percent, which is quite stunning. WeWork ultimately pulled the IPO or there indicating that it is delayed for now after facing pressure from its largest shareholder, SoftBank. This share sale is expected to raise at least three billion dollars in equity and also trigger a six billion dollar loan package. WeWork is now going to have to go hat in hand to investors because they expect to find 9 billion dollars from this initial public offering, which now is off the table. One possible source of new funding is SoftBank, which is WeWork’s largest investor. They are actually planning on investing 750 million more as part of the IPO, which would have been over 20 percent and they still couldn’t sell it, which was quite shocking to me. It really shows how sceptical investors are of this deal.

Interesting to note that SoftBank and its Saudi Arabia backed Vision fund, they have already invested over 10 billion dollars in WeWork and they own 30 something percent. If WeWork is going to be valued at 10 billion, then there is a massive destruction of capital there. Nonetheless, WeWork indicating that it expects to IPO to go ahead by the end of 2019. Just to comment on the IPO window, I mean, it is still wide open. It is really just a banner year for IPO we saw a lot of high profile IPO such as Uber and Lyft, which has really stumbled out of the gate. We saw a bad one last week being SmileDirect, which tanked I believe 28 percent on its first day. We have had Slack with uninspiring trading. So interesting dynamics in the IPO market a lot of deals coming out, many not so successful, though. What are your thoughts here?

Michael Kesslering: Yeah. Their plans to delay it till the end of the year. I really do not know what is going to change in terms of investors’ analysis of the company or overall sentiment towards WeWork that would result in their valuation being increased materially. I really do not know how successful that would be. Some other points just, you know, the ramifications of this WeWork IPO delay is their bonds ended up selling off on the news of the delayed IPO. They are now trading below par.

Julian Klymochko: Yeah, down 5 percent.

Michael Kesslering: Yeah. Which is a big move for corporate bonds. Five percent is a very large move. I believe their yields are in the high single digits.

Julian Klymochko: The other interesting price action is now private market investors can no longer mark it at 47 billion. It is actually significantly lower than that. The beauty of private market valuations is they tend to be updated quite slowly.

Michael Kesslering: Absolutely. The other thing I wanted to bring up was you did bring up Masayoshi Son in the SoftBank’s Vision Fund. One interesting thing with Son’s ownership with SoftBank is that he has actually pledged 38 percent of his equity ownership and SoftBank as collateral for personal loans, for liquidity, for his personal life and other investments outside of SoftBank. The issue with that is that if their stock, which is publicly traded, if their stock goes down significantly, he is at risk for margin calls. He also does have a leverage stake in the vision fund along with a number of employees at SoftBank.

Julian Klymochko: Right. A margin call would entail banks selling out the stock as it drops as security for the loan. Effectively, he has to repay it if the stock drops a certain amount and he repays it by selling it.

Michael Kesslering: Absolutely. In terms of context, of the 38 percent that is pledged as collateral for personal loans is typically you see that when that is a tactic used by CEOs or founders. It is typically in the single digit range but there are some other examples of founders that have used a very high degree of leverage on their personal loan side using their shares as collateral. That would be Larry Ellison of Oracle, who I believe he has 27 percent of his equity stake pledged as collateral and Elon Musk of Tesla, who has 40 percent of his stake in Tesla, pledged as collateral.

Julian Klymochko: Yeah, the other interesting aspect, this WeWork CEO, he actually has a margin loan on his private market shares of close to I believe it is over three hundred million dollars. Obviously, the banks are very, very concerned about that now with a massive drop in valuation. That will be an interesting one to watch there.

Michael Kesslering: Absolutely. In terms of the dynamics too is who wants what in this situation. The banks are both the underwriters. The same banks are the underwriters for the potential IPO are also creditors, to WeWork as well as equity investors. They have been doing these loans at a price range that really is quite favourable for the company and where they are really going to get their payback on investment is this IPO both in terms of, you know, all of the glamour that goes with underwriting such a large IPO as well as the fees. That is why the banks are really pushing them towards this IPO.

Julian Klymochko: As expected, the Federal Reserve cut its Fed funds rate this week by a quarter point, zero point two five percent, but again in the range of one point seventy five to two percent. This was its second interest rate cut this year in as many months. This was really in line with expectations what the market was expecting. The central bank’s projections, they come out with the so-called dot plot, which shows there four projections for interest rates, as indicated, a more hawkish stance than markets anticipated. The median forecast amongst its rate setting committee was that rates would be at the same level at the end of 2020 as they are now, which is a big divergence between what the market’s thinking because futures are pricing in rates probably 50 basis points lower. So futures are really expecting two more rate cuts to happen over the next year or so but the FOMC members thus far not putting that out there. These dot plot forecasts from all 17-policy makers showed even broader disagreement. So there is seven expecting a third rate cut, 5 seeing this as being sufficient, no more rate cuts in 2019 and five who are against the rate cut.

We are seeing interesting implications in the futures market and the market’s pricing in a forty five percent chance of another rate cut next month in October. Now, this was up from 41 percent prior to this week’s rate cut decision but the odds of a December rate cut after that have really collapsed. I mean, about a month ago is a coin flip near 50 percent chance that is down to almost 10 percent. So more rate cuts getting priced out of the market. Ultimately, the biggest news behind this rate cut I mean, the rate cut was consensus had been really expected, this 25 basis point cut. The big news here is that most policymakers at the Federal Reserve do not expect to cut rates further this year, which is in stark contrast to what markets thinking. At least one or two more for 2019, it is an interesting dichotomy there. What are your thoughts on this recent Fed action?

Michael Kesslering: Yes, there is. I think you mentioned some of the dissenting opinions, but this there was actually the vote was approved seven to three. Three dissenting opinions, which is the most in the last three years. So there is just no clear-cut track of the way that the Fed is going to move forward. As you had mentioned, I would also agree it was the consensus move where it really is unclear is just how they are going to play this moving forward, as I really do not have a crystal ball in this situation of how this is going to work out.

Julian Klymochko: Yeah, they indicate that they are data dependent, their dual mandate is maximum employment, and unemployment rate is near an all-time low of three point seven percent and then stable pricing. I believe CPI last was what, two point one percent, so slightly above their target. If they were truly data dependent, they would not be cutting rates here. It is that they are really freaked out about the trade war, about the global slowdown. You got Trump breathing down their neck and even after this, Trump was highly critical. The president is calling for zero rates or even negative rates. Trump is really bashing them, putting maximum pressure on the Fed here. I actually think that there is a lot of merit to the Federal Reserve members who opted for no cut because if they truly were data dependent, then there would be no rate cut.

However, we always joke that there is a third Fed mandate, which is S&P 500 targeting. It is typically under the guise of, quote, financial conditions, but by financial conditions that they do refer to, they are really talking about stock market returns. They want to see a strong stock market. I think that ultimately they are trying to juice the market to new all-time highs, which it is in very close range. There is some price action here. You saw bonds drop – yield on the 10 year note, climbed from one point seventy five percent to one point seventy nine percent and as listeners know, bond yields and prices move in opposite directions. So yields climbing, bond prices falling. The Dow Jones is up 100 points, point four percent. S&P 500 up the same and the Nasdaq up by point seven percent on the news.

Put out a blog post this week that I wanted to touch on its part of our new series called Live From the Trading Desk. This one is entitled The Great Short Squeeze of 2019. Really just wanted to comment on some of the price action in early September, specifically the first seven trading days between September 1st and the 11th. Most people probably did not notice this because markets overlooking kind of the broad market indices were quite calm. S&P 500 was up two point six percent. The TSX composite up about 1 percent. The VIX, the volatility index was relatively tepid, but they are pretty wild swings underneath, basically dealing with momentum stocks.

Now, there is such thing as a momentum factor. They are betting that stocks that have been performing well, that have been going up will continue to go up and vice versa. Stocks with poor momentum or that have been going down; you expect to go down so you can put together a long, short portfolio, long highs, momentum stocks, and short notice momentum stocks. You have done well over time except in early September through September 9th and 10th. This strategy, long, sharp momentum had the worst return, worst two-day return on record, dropping more than 8 percent, which is a pretty wild swings in the midst of calm market and indices going up. If you look at the Russell 1000 and look at the top six stocks year to date, they actually had massive downward moves of 10 percent drop just on September 9th. Companies like MarketAxxess, Roku, Coupon Software, and then you look at the bottom half a dozen performers of the Russell 1000 over the past year, stocks that have been absolutely crushed they had a massive rally on September 9th. Up an average, 10 percent. You had companies like Range Resources and Antero Resources. This was extra strange because there really was no direct catalyst for this move of how, you know, high quality, great stocks that have been performing well, they really just got canned. They tanked by massive amounts from the first through the 11th of September but really that was focused in September 9th and 10th.

Not only that, but on the other side of stocks that hedge funds would be short the ones seemingly headed to zero. They staged a massive dead cat bounce or rally off the lows of double digits. If you are a short seller or a long-short fund, you faced some significant pain. Now I wanted to contrast historical returns of this momentum strategy. Historically the top 10 percent best momentum stocks over the past 20 years have compounded at roughly 12 percent annually that is 12 percent annual gains for the best momentum stocks while the worst momentum stocks have actually lost 2 percent per year. However, for the first seven trading days of September you saw this relationship completely reverse and then some. The top decile, the best 10 percent momentum stocks actually dropped by 1 percent over these 7 trading sessions and to really make it painful for short sellers. The worst momentum stocks the worst 10 percent actually rallied about 19 percent making that long short return which you expect to do well over time that dropped 20 percent over seven trading sessions. Historically that spread between the best momentum and the worst momentum stocks is 14 percent per year so not only did you not get a positive 14 percent but also you got a 20 percent loss in roughly a week, which was certainly a pretty outstanding and painful thing to go through as a long short hedge fund. The other interesting aspect is typically the value factor where you are betting on cheap stocks and betting against expensive stocks this is typically negatively correlated with momentum i.e. when momentum is suffering typically the value factor makes up for it.

Commenting on the September price action cheap stocks actually did very well but unfortunately so did very expensive stocks negating the entire effect of this value factor so it did not help investors at all. A multi factor investors suffering from no performance contribution from the value factor, which you expect, could bail you out when momentum is really going against you.

In summary, there is a really fascinating dichotomy in investing that’s inherent effectively to have attractive long-term performance that strategy is actually required to have short-term downturns that spook investors away because this is necessary. If you think about it if this strategy worked all the time, every investor would do it and paradoxically it would cease to work because everyone knows something is going to happen and you know it will not happen because that is how betting markets like the stock market ultimately work. I just wanted to summarize that vicious short squeeze for investors and the pain that long-short investors did in fact take in early September but I wanted to contrast that with great expected returns over the long term but nonetheless with great long-term returns come the occasional short term pain.

Michael Kesslering: Absolutely and in terms of the momentum factor just on its own it’s something that kind of brings up the point of the difficulty of just running a fund using the momentum factor and it really would provide support for that multi strategy approach when building an actual fund.

Julian Klymochko:  Oh, right its way too volatile to run a single factor long short fund. As we saw early September momentum just getting crushed to the tune of negative 20 percent. The real benefit of having uncorrelated factors is it really helps mitigate that damage. I always like to make the analogy to that old cartoon character Voltron where you know many of these kind of superhero beasts each on their own are pretty powerful but then they form this ultra-beast Voltron which can really kick ass far more than any one of them could on their own.

Michael Kesslering: Absolutely. And just to tie up a loose end from about a month ago I think we were talking about Patrick Byrne from Overstock and so there’s been a few interesting things happening in that stock. Do you want to go over a little bit of that?

Julian Klymochko:  Right. This was one of the prime candidates of what we’re calling that great short squeeze of 20 19 which really encapsulated many what we call junk stocks low quality stocks that are seemingly circling the drain heading to zero Overstock actually being one of them. I do not believe we have a position in that. However, what Patrick Byrne did is he engineered a massive short squeeze by issuing a cryptocurrency dividend in which short sellers could not cover. When you are short a stock and it issues a dividend you have to pay out that dividend to the party in which you borrowed the shares from. However, this cryptocurrency is currently unavailable and it is effectively forced short sellers of Overstock shares to cover which caused a massive short squeeze a massive rally in the shares they rallied north of 100 percent they believed around from around the 10 dollar range to as high as 26 bucks per share and to make it worse, he actually went out and sold all of his shares his entire thirteen point six percent stake in Overstock.com into this short squeeze. So real kind of scummy behaviour in my opinion and certainly the S.E.C. is not liking that engineered short squeeze especially when the now ex CEO sells his entire stake into it.

That is it ladies and gents for Episode 32 of the Absolute Return Podcast as always you can check out more on absolutereturnpodcast.com if you like it please leave us rating tell your friends your co-workers but that’s it for us for this week. We will chat with you on the next one. Cheers.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.