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Short-seller Citron changes course, adjusts to new reality

Andrew Left, the founder of Citron Research, speaks during the Reuters Global Investment 2019 Outlook Summit, in New York

(Reuters) -Short-seller Andrew Left, whose company Citron was one of the hedge funds to spark this week’s battle with small-time traders over GameStop Corp, said in a YouTube video on Friday that his company would no longer publish short-selling research.

The latest twist in a saga that has sent shock waves through Wall Street as amateur investors pile into heavily-shorted stocks like GameStop and AMC Entertainment Holdings Inc, the move is a major change of course for one of world’s best known short-sellers.

Left, the author of dozens of investigative reports on S&P 500 over the past decade, is credited as helping pioneer the tactic of betting against a stock by publishing research that encouraged others to follow his lead and profiting when they do.

“As of today, Citron Research will no longer be publishing what can be considered as short-selling reports,” Left said in the video. https://www.youtube.com/watch?v=TPoVv7oX3mw “The Citron narrative is going to change and have a pivot.”

Short sellers typically bet against companies that they believe have outdated business models or are overvalued.

Hedge funds are known for the tactic but only a handful of firms – including Citron, Jim Chanos’ Kynikos Associates, Carson Block’s Muddy Waters Research, and Ben Axler’s Spruce Point Capital Management – specialize in it.

Left’s retreat, which follows his abandonment earlier this week of the bet against GameStop, comes as funds and other investors who have shorted U.S. stocks face the prospect of tens of billions of losses on the trades.

Melvin Capital, a $13 billion hedge fund, on Monday received a financial lifeline of nearly $3 billion from Citadel and Point72 Asset Management after being crippled by short bets that went the other way.

PULLING THE PLUG

Left had said earlier this month that he had shorted GameStop with its share price at around $40, expecting it to halve in value.

On Friday, he reiterated his conviction that GameStop was a dying business and its stock price would fall sharply in the future.

“If you choose to buy GameStop here, it’s caveat emptor. You know what we think about their business model. It’s on you,” Left said.

Citron’s most famous short positions include those against companies including Valeant Pharmaceuticals International Inc and electric vehicle maker Nio Inc, which led to shares of those companies collapsing.

“When we started Citron, it was to be against the establishment, but now we’ve actually become the establishment,” Left said on Friday.

(Reporting by Anirban Sen, Niket Nishant, Shariq Khan and Sohini Podder in Bengaluru; Editing by Shounak Dasgupta and Anil D’Silva)

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