Trader in France Scores Third Victory in Short Selling Contest
Posted: September 17, 2024
September 16, 2024 (Maple Hill Syndicate) – Laurent Condon, a professional stock trader in France, has won my annual short-selling contest for a third time.
Condon scored a 99.7% gain on his entry from a year ago, Mullen Automotive Inc., an electric car maker based in Brea, California. The stock has descended from $45 a share when the contest began to 13 cents a share as of September 13. Short sellers gain when a stock falls.
I call this contest Short Sellers Don’t Have Horns, because I believe that short sellers provide a useful antidote to the hype that surrounds some overvalued stocks.
There’s no risk in entering the contest, but in real life, short selling is a risky investment technique. In a regular purchase of stock, the maximum loss is 100% and the potential gain is unlimited. It’s the reverse with short sales: The maximum gain is 100% and potential losses are unlimited.
Condon won this contest in 2017-2018, again in 2021-2022, and yet again in 2023-2024. He has also finished second once and third once.
To boot, he has twice won honors in my traditional stock picking contest, in which the goal is to pick stocks that go up.
Danger Sign
One danger sign that motivated Condon to pick Mullen Automotive as his short is the company’s history of doing reverse stock splits – often a desperation move.
In a reverse stock split, a company shrinks the number of shares so that each share is worth more. The goal often is to meet the minimum share-price requirement for a stock exchange. From 2016 through 2023, Mullen did five reverse stock splits.
When I interviewed Condon a year ago, he was leaning toward picking WeWork Inc. (WEWKQ) as his short pick for the contest. Had he chosen it, he would still have won the contest. WeWork (a provider of shared office space) went bankrupt and the stock is now worth zero.
Condon thinks the market presently is a fertile ground for short selling because he sees “a lot of speculation.” Many investors, he says, “are kind of blind to what they are chasing, which is good for me.”
One stock (actually an exchange-traded fund) he thinks is a good short is Valkyrie Bitcoin Mining ETF. As its name implies, it invests in companies that do online “mining” of Bitcoin.
Second Place
The man who placed second in the latest contest is a stock analyst I call “Sam.” He is an analyst at an East Coast investment firm, which hasn’t given him permission to talk with the press – hence the anonymity.
Sam came in first in the contest in 2022-2023. This year he placed second with a 97.16% return on MSP Recovery Inc. (LIFW). The company tries to ferret out claims that have been paid by health insurers and should have been paid by someone else, such as car insurers or workers’ compensation.
MSP’s revenue is small and falling. It was less than $8 million in the past four quarters, down from more than $23 million in 2022. MSP Recovery did a reverse split last year, giving holders one share for each 25 shares they previously owned.
For the next contest, Sam says he would short Mullen Automotive, the same stock with which Condon won this year. Mullen’s revenue in the past four quarters was $160,000 and it has “more than $50 million a year in expenses,” Sam says.
Third Place
Third place goes Harry Feld, a retired chiropractor in Delray Beach, Florida. His short pick a year ago, ShiftPixy Inc. (PIXY) fell 93.85%.
ShiftPixy offers services such as human-resources consulting, payroll processing, and workers compensation administration to small businesses. It’s based in Miami, Florida.
“My main reason for shorting it” Feld wrote in his entry a year ago, “is that it has never made any money and it will be doing a 1-to-24 reverse split soon.”
Feld had previously taken second place in this contest in 2109-2020. He has also won honors a couple of times in my traditional stock-picking contest.
You Can Play
Would you like to try your hand at short selling, at least on paper? Enter my 22nd annual Short Sellers Don’t Have Horns contest.
It’s easy. Pick a U.S. stock you think will decline a lot from September 30, 2024 through September 12, 2025. You are not required to sell the stock short with real money, but it’s okay if you do.
Prizes are given for first place only. They all have something to do with the word “short.” Past prizes have included music by pianist Bobby Short, a strawberry shortcake, and a biography of Napoleon (a famous short person).
To enter, please submit the following:
- Your name
- Home city
- Phone number (including weekend number)
- Name and stock symbol of the stock you think will fizzle
- A brief statement of the reason you expect the stock to decline.
Entries may be emailed to jdorfman@dorfmanvalue.com or mailed to John Dorfman, Dorfman Value Investments, Suite 1900, 101 Federal Street, Boston MA 02110.
Disclosure: I have no positions in the stocks discussed in today’s column, personally or for clients.
John Dorfman is chairman of Dorfman Value Investments in Boston, Massachusetts. His firm or clients may own or trade the stocks discussed here. He can be reached at jdorfman@dorfmanvalue.com.