Sahm Adrangi knows the opacity of the Chinese markets and currency climate as well as anyone – after all, he built his career out of it. As consternation grows over Chinese debt levels, interest rate policy, and its trading relationship with the United States, a key factor weighing on investors’ minds is uncertainty, owing to the unreliability of the Communist Party’s official economic statistics. Adrangi understands how difficult it can be to trust information coming out of China – he made his first splash in the financial world by shorting fraudulent Chinese companies listed on American exchanges, broadly sharing his detailed research, then cashing out when the companies tanked.
In doing so, Sahm Adrangi and his fund Kerrisdale Capital carved themselves a niche within the growing world of short activism, and today are one of the thought leaders in the evolving strategy. A graduate of Yale, Adrangi began his career as an investment banking analyst at Deutsche Bank, then spent time at the distressed debt fund Longacre Management before launching his own firm Kerrisdale Capital Management.
Kerrisdale Capital has made a name for itself through savvy research and short selling. The fund had a strong start, using its shorts of Chinese frauds to turn in a blockbuster year in 2011. In just three years, Adrangi had turned his initial $300K friends and family fund into an institutional facing hedge fund managing more than $250 million.
After its initial years focusing on Chinese frauds, Sahm Adrangi has since turned his attention to Western companies, like many of his short activism peers.
In particular, Adrangi has honed in on the telecommunications sector. In 2014, his firm held a live presentation on Globalstar, sharing his arguments for why the satellite company’s spectrum was unusable because of its proximity to highly used Wi-Fi and cellular bands. Adrangi went so far as to meet with the Federal Communications Commission to present Kerrisdale’s findings as part of the FCC’s Terrestial Low Power Service proceedings.
In 2016, Adrangi shifted gears to a much larger spectrum story – DISH Networks. Adrangi believed that the markets were placing too high a value on DISH’s AWS-4 cellular spectrum, and that no buyers would emerge for the spectrum before DISH lost its licenses in 2020. He laid out his argument in a website that Kerrisdale created: www.makespectrumgreatagain.com.
Notably, Adrangi raised more than $100 million in a coinvestment vehicle for the trade. This is the largest ever reported capital raise for a single name short selling opportunity.
One thing that makes Adrangi different from most other hedge fund managers – and Wall Street in general – is his penchant for using social media to share his investment ideas. Wall Street has historically looked askance at social media, although that is fast changing with managers like Carl Icahn, Jeffrey Gundlach and Bill Ackman taking to twitter in recent years.
Sahm Adrangi, who set up his firm’s @kerrisdalecap and personal twitter account in 2013, has learned to play the media game the way the big firms do, targeting little-known companies that do not always get major attention. Adrangi also utilizes an ever-growing email list sourced through subscribers to his firm’s website to distribute his investment ideas to subscribers.
In the case of DISH, Adrangi built interest in the investment idea via social media, tweeting “we’re working on a $10bn+ company that we believe is worth 60% to 80% less than its current trading value… we’re still weeks — perhaps many weeks — away from actual publication.” This was followed by an appearance on CNBC for the big reveal. He then took to the internet with his research and the “Make Spectrum Great Again” website outlining his position.
As with many of his shorts, it will take years to find out whether Adrangi’s predictions prove correct. Last month, several biotech companies that Adrangi said would fail pivotal Phase III trials ended up indeed reporting disappointing results, but years after Adrangi’s original reports. Kerrisdale’s arguments about DISH are also finally beginning to get wider traction, as more and more telecom analysts begin to doubt whether DISH can sell its spectrum before its 2020 FCC deadline. DISH stock is down more than 20% so far this year.
As for Adrangi, he stands by his research and investment. In his initial report, Kerrisdale stated that time was not on DISH’s side. As 2020 approaches, it will be only a matter of time to see whether Adrangi’s arguments are proven right.