Nathan Anderson has gained enough notoriety by digging into alleged corporate frauds to know that he can be persona non grata at New York parties.
“I don’t start with ‘hello, my name is Nate and I’m a short seller,’ says the founder of Hindenburg Research. “It’s a great way to get kicked out of any party or social setting. ”
Anderson has made a name for himself taking on some of the most popular companies to go public as part of the recent blank check company boon, including electric truck start-ups Nikola and Lordstown Motors.
This week, he launched a bombshell on the already struggling market of specialist acquisition companies by targeting Kings of the draft, the sports betting industry widely regarded as the catalyst for the boom. Stocks initially fell more than 11%, but have since recovered significantly.
Spacs is having a record year with more than $ 100 billion raised so far, according to Refinitiv, but for Anderson the repeated targeting of the sector is unintentional. “We’re not really going off and saying, ‘Hey, we’re going to be looking at Spacs today,'” he said, adding that his team was “sort of tracking” an apparent fraud.
The 37-year-old, who built a small team in Hindenburg with five full-time employees and a handful of entrepreneurs, has bet his life on critical research which he says plays an important role in the markets of today.
“Not all stocks deserve to go to the moon,” he says.
Affable and at times self-deprecating, Anderson grew up in a small town in Connecticut and went on to study International Business Management at the University of Connecticut. Wanting “a more diverse set of life experiences,” he opted for a study abroad trip to Jerusalem, where he also volunteered for a local ambulance service – an experience that always informs. his approach to short selling.
“As a paramedic, you do your best to heal things that are broken,” he says. At Hindenburg, “we step in and try to shine a light on some of these issues that might be lurking beneath the surface of some of these companies, in some of these industries, and see if we can make it better.”
Back in the United States, Anderson accepted a consulting position with financial software company FactSet, managing accounts receivable for investment managers, where he realized that “the processes at these companies were pretty much the same. and not particularly sharp ”.
Roles in brokerage firms in Washington and New York followed, including due diligence on hedge funds and investment opportunities. He began to notice potential pyramid schemes and, “fueled by a combination of fascination and horror,” he began to seek them out at his own pace.
His first big breakthrough came as he sought to hone his investigative skills. Anderson reached out to Harry Markopolos, the investigator known to report Bernard Madoff’s Ponzi scheme, and they teamed up in a case against Platinum Partners, the hedge fund ultimately accusing of a $ 1 billion fraud.
Anderson and Markopolos have yet to be identified as sounding the alarm in the case, in which seven senior executives have been criminally charged and several have pleaded guilty.
“He’s a world-class digger,” says Markopolos, whom Anderson considers a mentor. “If there are facts he will find them and too often he will find that there are skeletons in the closet.”
Sometimes having to “work to keep the lights on,” Anderson bolstered his tight budget by selling parts of his cases to members of a small group of like-minded researchers in exchange for a share of any payment. It initially tackled small businesses, but has since picked up its pace.
“Nikola was his breakthrough in size and notoriety,” says Markopolos. “He’s on a roll and businesses fear him.
Anderson’s emergence comes at a difficult time for short sellers, who have been brutalized by the longest bull market in history. Even heavyweights such as Jim Chanos and David Einhorn struggled in a steadily rising market; others, including Bill Ackman, have completely stopped betting against corporations.
This has been a particularly busy year, with the emergence of the Reddit trading army uniting to boost short stocks and for whom short sellers are public enemy number one. Anderson has been the target of countless posts on day trader forums, but he takes it all in stride. “Finance before memes was a lot less attractive,” he says.
One of his favorites is a video depicting Chamath Palihapitiya – the prolific Spac sponsor who made Clover Health public – as King Kong and Hindenburg, who published critical research on the company, as Godzilla. In the clip, “King Kong absolutely beats the living tar of Godzilla, and we were like, it’s really well done.”
Other financial professionals, even on the buyer’s side, say they welcome his research. Tony Kypreos, founder of an investment advisory firm who first met Anderson eight years ago, says there are relatively few people doing comparable work.
Anderson “does a very noble service, because if you show that public companies or private funds are releasing incorrect data, that’s a big deal,” Kypreos said.
The companies targeted by Hindenburg don’t feel exactly the same and have disputed or played down his claims, with some saying his reports are a publicity stunt.
Anderson insists he’s not completely bitter about blank check vehicles.
“I always keep an open mind that there might be a good Spac there,” he says. “I have not seen it again.”