Spreadtrum Communications: Dives on Analyst Short, Then Rebounds

By David Berman

While some investors are clearly keen to ride the coattails of Carson Block, others are doing just fine betting against him. Tuesday it was reported that Mr. Block, head of Muddy Waters Research, had taken a short position against Spreadtrum Communications Inc. (NASDAQ:SPRD), a Chinese chip-maker, essentially betting that its shares would fall in value.

The bet comes not long after the same guy made a similar move on Sino-Forest Corp. (OTC:SNOFF), and co-ordinated it with a report that accused the Chinese forestry company of financial shenanigans. None of the allegations has been proved, but Sino-Forest shares have plunged, its biggest investor has ditched his holding and Mr. Block has emerged with an international profile.

His move against Spreadtrum had an immediate – though not long-lasting – impact. The shares fell 35 per cent in about an hour in midday trading, but then recovered nearly as fast. With about two hours left in the trading day, the shares were down just 5 per cent. In other words, anyone who bet against Mr. Block at the depths of the day might walk away with a tidy profit.

Then again, these are likely early days for this story. My colleague Boyd Erman has more on Mr. Block's rationale here.

Disclosure: None