Build It. They'll Come. Bronte Capital co-founder & Investment Officer John Hempton on why he follows corporate fraudsters & short sells shares; and why he was right about Europe’s big stock fraud, Wirecard, but HOW he still lost money on it.
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Aug 2, 2020 John Hempton, co-founder and Chief Investment Officer at Bronte Capital, is known for his unconventional approach to investing. In this discussion, he dives into the art of short selling and his fascination with tracking corporate fraudsters. Hempton shares insights on the infamous Wirecard scandal, revealing the shocking failures that allowed €1.9 billion to disappear. He also examines the risks of short selling, the moral dilemmas it presents, and the urgent need for regulatory reform to prevent corporate deceit.
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Early Wirecard Identification
- John Hempton, a short-seller focused on fraud detection, identified Wirecard as a fraud in 2009.
- Despite being right, Wirecard's share price surged from €8 to €191, causing significant losses for Bronte Capital.
Australia: Haven for Fraud
- Australia's superannuation system, with its large pool of uninvolved investors, creates a haven for fraudsters.
- The combination of a developing regulator, vast dumb money, and strict defamation laws makes Australia vulnerable.
Tracking Fraudsters
- Maintain a database of known fraudsters and track their activities using automated tools.
- Scrape databases like the USSEC, use name recognition software, and match it against your database.