REUTERS/Rick Wilking
Muddy Waters founder Carson Block.
- Muddy Waters Capital is short French IT firm Solutions 30 in a trade worth about 6 million euros ($6.7 million).
- It's unusual for Muddy Waters to short a company without an accompanying research report criticizing the firm.
- Founder Carson Block told Business Insider last year that he was souring on shorting European companies.
Muddy Waters, the bearish hedge fund founded by short seller Carson Block, is shorting Solutions 30 in a trade worth about 6 million euros ($6.7 million).
It looks like a winning trade, at least judging by morning trading on Monday. The stock is plunging more than 22%.
According to a EU regulatory disclosure, which was spotted and analyzed by research firm Breakout Point, the hedge fund has a short position of a little over 5% of Solutions 30's stock.
The trade is unusual because Muddy Waters is an activist short seller, meaning the fund usually publishes critical research of companies in tandem with shorting the shares. As of yet there is no research report about Solutions 30 on the hedge fund's website.
This is the first time that Solutions 30 SE appeared in Breakout Point's records. Unlike in the US, some European countries require that investors disclose short positions breaching 5% of the stock.
The company said last week that sales in the first quarter surged 88%. A request for comment from Solutions 30 wasn't immediately returned.
First European short since 2016
Block, who also did not immediately return a request for comment, has said that he was souring on shorting companies in Europe, in part because the region has a more deferential investing culture relative to that of the US.
Muddy Waters has published research criticizing British semiconductor IQE, France's Casino Guichard-Perrachon, and Rallye, another French company.
"Europe has a lot of structural issues that promotes poor corporate governance," he told Business Insider in December. "Presumably, that creates a target rich environment, but in Europe there just isn't the protection of free speech the we have here in the US."
He continued: "That presents issues when your business model is speaking truth to power. There's a temptation for power to be misused to punish the speakers unduly when the scrutiny should be on the companies."
Block said then that Muddy Waters hadn't initiated a short against a European company since April 2016, when he accused the German ad firm Stroeer of overstating its cash flow.
"Never say never," he said in December of targeting Europe again. "I'm always watching."
Look at the plunge in Solutions 30 shares below:
Markets Insider