Short-seller Spruce Point Launched Attack on Momo
On Wednesday, Spruce Point Capital fired its first salvo on live-streaming and hook-up services company Momo (NASDAQ:MOMO). Spruce Point described itself as an "industry recognized research activist investment firm." Founded in 2009 by former investment banker Ben Axler, Spruce Point pointed to a 2016 survey by Sumzero, an online community of buy-side professionals, which ranked the firm as the top short-seller in the world. Let's look at the share price development of a targeted company following the release of a "research call" from Spruce Point on January 25, 2018.
Ballard Power (BLDP) saw its share price plunge as expected on the day of the report release. However, the stock recovered and even spiked upwards sharply the next day. Subsequently, the stock remained volatile and since the research call by Spruce Point, it is down 24.8 percent. Given the greater losses have occurred only in June, the stock might have weakened for reasons not attributable to Spruce Point's revelations. Nevertheless, the fact remains that investors in Ballard Power have seen their holdings devalued since the "attack." Hence, perhaps Momo's shareholders should pay attention to what Spruce Point has to say.
For Momo, after the report by Spruce Point was published on Wednesday, June 27, 2018, its share price continued a slump which began the day before. The stock declined as much as 18 percent compared to the start of the week at the lowest point on Wednesday before recovering some losses by the end of the day. Looking at the other live-streaming plays, Momo's share price movement did not seem unusual. If the short-seller report was to blame for Momo's decline, why then did its peers, iQIYI (IQ) and Huya (HUYA), drop more from the day's high on Wednesday? Interestingly, Momo's rebound the
