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In an exclusive interview with WWD, Burberry CEO Joshua Schulman said he's looking at Burberry holistically, filling the shop floor with hero products and wooing traditional customers in a bid to restore the brand to its former glory.

LONDON — Since he joined as chief executive officer in July, Joshua Schulman hasn’t wasted a minute in his effort to turn around Burberry, which has been hit by a double whammy of slowing luxury demand and past strategies that drove the brand into territory that was too niche, too fashion and too expensive.

In an address to financial analysts following the first-half results, Schulman talked about his work so far and, in doing so, offered up a potential master class in how to revive a heritage brand.

He laid out his strategy to restore sales and profit growth; talked about joining the dots between the creative, merchandise and marketing teams, and revealed plans to speak to a wider base of customers, especially those left in the cold by Burberry‘s failed, high-fashion moves.

There is a long way to go. Hours before Schulman addressed the analysts, Burberry reported a 22 percent decline in first-half revenue to 1.09 billion pounds, and a reported operating loss of 53 million pounds for the six months to Sept. 28.

Comparable store sales were down 20 percent with double-digit declines across all regions. The company reported an adjusted operating loss of 41 million pounds, compared with a profit of 223 million pounds in the corresponding period last year.

Schulman said Burberry is “acting with urgency to course correct, stabilize the business and position Burberry for a return to sustainable, profitable growth.” He said he has no doubt that Burberry’s “best days are ahead.”

His medium-term goal is to restore the company to its golden days of 3 billion pounds in annual revenue, with operating margin in the high teens. Once he achieves that goal, Schulman wants sales — and profitability — to go far beyond those numbers.

He laid out his strategy with confidence and enthusiasm during the analyst meeting, and later in an interview with WWD.

Schulman argued that over the past several years, Burberry moved “too far from our core with disappointing results.”

So many mistakes were made. The focus, he said, was on being “modern at the expense of celebrating our heritage. We introduced new brand codes and signifiers that were unfamiliar to our customers. Our product was weighted to seasonal fashion with a niche aesthetic obscuring our more timeless core collections.”

Schulman added that as Burberry pursued brand elevation, “our pricing, particularly in leather goods, did not always align with our category authority. Consequently, Burberry’s offer was skewed to a narrow base of luxury customers.”

Not any more. Schulman believes Burberry “has the most opportunity where we have the most authenticity,” and wants to “pivot to a more recognizable and timeless expression” of the brand.

Going forward, Schulman will focus increasingly on the merchandise and the consumer.

His plan is to stock shop floors and ad campaigns with hero products, install “scarf bars” and “trench destinations” in the stores; go big on gabardine, the brand’s signature weatherproof fabric patented by Thomas Burberry in 1888, and make the brand recognizable once again to its core customers, who never stopped loving the check.

Schulman, a merchant to his core who has managed myriad companies ranging from Jimmy Choo to Bergdorf Goodman to Coach, believes scarves are a Burberry “superpower” and wants them merchandised like sweets in a candy store, rather than in glass cases.

He’s also put mannequins back on the shop floor, and plans to start cross-merchandising products such as scarves, capes, hats and gloves. He’s looking beyond the trench and putting a fresh focus on Burberry’s outerwear, with plans to offer jackets, coats and puffers for every kind of temperature and weather.

He wants to add authenticity and warmth to the ad campaigns, and showed a video from the latest holiday one at the analyst meeting. “Who doesn’t love puppies and babies?” Schulman asked after a series of jolly holiday-makers flashed up on the screen.

Schulman is determined to keep Burberry’s high-end positioning rather than pivot to “accessible” luxury. His plan is to broaden the price points; leverage Burberry’s pricing power in key categories such as outerwear, and keep leather bags, where the brand has less authority, hovering under 2,000 euros.

“It’s very clear what needs to be done. The customer loves Burberry, and there is pent-up demand” for the brand to just be itself, Schulman said in an interview at his office overlooking the treetops of Westminster. “And we need to love the customers we have as much as the customers we want.”

Schulman insisted that big luxury businesses cannot exist on “small niches of customers alone. They need to speak to a broad spectrum of luxury customers. At their best, those brands allow different customer types to find themselves, and express themselves, in the brand.”

While much of Schulman’s focus over the past few months has been on merchandising and wooing back the core customer, he’s also been working closely with the teams, bringing Burberry’s creative and marketing talents together, and giving them a clear set of goals.

“I was surprised that for a business of this scale, design was a very siloed function. I believe Daniel [Lee, Burberry’s chief creative officer] and his team were craving interaction” with the other teams such as marketing and merchandising, Schulman said.

“It’s an area where I’ve leaned in. You want the teams to work holistically in service to the brand. There is real opportunity here to evolve our ways of working,” he added.

A recent example of that cooperation is the new holiday ad campaign, which features celebrities and Burberry fans, including two longstanding Burberry customers from Nebraska, Dr. Herschel Stoller and Dr. Lilly Stoller.

Burberry’s new chief marketing officer Jonathan Kiman had spotted them in the New York store, spoke to Lee about featuring them in the campaign, and the two pitched the idea to Schulman, who said “yes” immediately.

Asked about Lee’s future at the company, Schulman described him as a “a very talented designer,” but declined to comment further. Lee, who was hired by Schulman’s predecessor Jonathan Akeroyd, said he likes working with Schulman, and hasn’t given any indication that he might leave.

“I enjoy his drive, his positivity and his way of communication. In its heyday, Burberry enjoyed American CEO leadership together with a British designer, and hopefully that’s a great synergy that we can get that on board with,” Lee said.

Schulman did say that one of the best surprises he’s had at Burberry has been the enthusiasm of the staff.

“The team loves the brand and inherently knows what the best path forward is. In many cases, a new leader might encounter resistance, but I have found that the teams are incredibly open to, and eager for, the type of change we are driving, both in the brand expression and in the way we work in the organization,” he said.

Schulman is also unruffled by working in the glare of the stock market. Burberry is 100 percent quoted on the London Stock Exchange, and Schulman said it’s business as usual.

“I’ve worked for public companies, big brands that belong to groups, and ones owned by private equity. You always have a shareholder, and you always have governance. My relationship with the Burberry board is great, and they have been very supportive,” he said.

Schulman added: “As an independent company, Burberry has advantages in the market. What’s been really interesting for me is that our industry partners like the fact that we’re independent. With all of the consolidation in the industry they like working with a sizable brand that’s not part of a bigger portfolio.”

He declined to comment on recent, unsourced media reports that Burberry might be taken over by luxury rival Moncler. “We’re very focused on what we have to do here, and we try to tune the noise out. We have a lot to do, and we’re hard at work,” Schulman said.

It’s clear he’s relishing the challenges of opening a new chapter for Burberry.

Schulman said he’s been following the company for decades — since the days of Rose Marie Bravo, the CEO who put Burberry on the fashion map.

Earlier in his career, Schulman also worked with Burberry’s former chief creative officer and CEO Christopher Bailey when both men were at Gucci under Tom Ford and Domenico De Sole. It was Bravo who recruited Bailey to Burberry.

During his days running Jimmy Choo in London, Schulman also tried to hire people away from Burberry, but he said it wasn’t easy.

“People loved the culture, and always talked about Burberry’s creative and commercial alchemy. I’ve always had an affinity for the brand and an admiration for the people and the culture. It’s still something I’m passionate about it. There are very few brands like Burberry, which are already at a certain scale, and that have unbelievable potential ahead to grow.”

The decision on whether to do so will be left to President-elect Donald Trump

The U.S. needs to be prepared to expand its nuclear force to deter the growing threats from China, Russia and North Korea, say senior Biden administration officials.

Decisions on whether to deploy more nuclear weapons are being left to the incoming Trump administration, which has yet to spell out its defense plans.

During his first term in office, Donald Trump endorsed all of the major nuclear weapons programs he inherited from the Obama administration and added two new nuclear systems. The Trump transition didn’t respond to requests for comment.

The Biden administration’s policy is codified in its “Nuclear Weapons Employment Planning Guidance” and comes as China is proceeding with a major nuclear buildup, Russia is balking at arms-control talks, and North Korea is increasing its nuclear-weapon arsenal.

That highly classified directive, which was signed by President Biden earlier this year, instructs the Pentagon to develop options to simultaneously deter aggression by China, Russia and North Korea.

Those nations that have been cooperating on military matters, raising the risk that Washington might need to grapple with several conflicts at the same time.

Biden’s policy, administration officials say, stresses the importance of developing advanced nonnuclear systems and deepening military cooperation with allies in Asia and Europe to cope with the potential dangers. The Pentagon, however, is also preparing options to deploy more nuclear warheads should those efforts prove insufficient, given the possibility of arms-control setbacks and further delays in fielding the next generation of U.S. nuclear systems.

“If current trends continue in the negative direction with Russia saying ‘no’ to arms control, China building up and North Korea building up, there may be a need to increase the number of deployed U.S. nuclear weapons in the future,” said a senior Biden administration official. “The question is can you make it less of a need if you do better on the conventional side and by integrating closely with allies.”

A declassified report on the nuclear employment guidance that will be sent to Congress on Friday doesn’t outline specific options under consideration but notes that “it may be necessary to adapt current U.S. nuclear force capability, posture, composition, or size” to deal with “multiple adversaries who are making nuclear weapons more central to their national security strategies.”

Trump will have some ready options to add to all three legs of what is known as the U.S. nuclear triad, which consists of land-based missiles, sea-based weapons and bombers. These potential steps include adding several warheads to the land-based Minuteman III missiles, deploying more nuclear weapons on submarines equipped with ballistic missiles and proceeding with the development of a submarine that carries nuclear-armed cruise missiles, a program that the Biden administration initially canceled but Congress restored.

The Trump administration “will be inheriting some rigorous homework and options,” said Vipin Narang, who served as a senior Defense Department official on nuclear issues until August. “So they can pick up the ball and continue to run with it.”

Those options parallel many of the recommendations in the Strategic Posture Commission, a congressionally appointed panel of former officials and experts charged with looking at security threats from 2027 to 2035.

Some arms-control experts, however, argue that the emphasis on building up the U.S. nuclear capabilities is misplaced.

“Investing in conventional capabilities seems to be a much more efficient way to influence adversaries than spending on more nuclear weapons,” said Hans Kristensen of the Federation of American Scientists, a nonprofit that looks at security issues. “You can use conventional weapons and we have a nuclear arsenal that has been structured to deal with a wide range of different scenarios.”

The current U.S. nuclear modernization program was devised when Washington was actively seeking to negotiate new nuclear limits with Russia, China had not yet embarked on a major nuclear expansion and North Korea’s nuclear program was less advanced. Now the nuclear planning is taking place as the arms-control agreements that regulated the nuclear competition have begun to unravel.

For decades, a core assumption was that U.S. and Russia nuclear arms could be progressively reduced through reciprocal agreements. But the New Start treaty, which was signed in 2010 and limits the U.S. and Russia to 1,550 strategic weapons, is due to expire in February 2026, and no talks for a follow-on agreement are currently under way between Washington and Moscow.

While Russia has suspended its participation in the agreement, it is still likely observing the accord’s warhead limits, the State Department said in a January report. That will give Trump an opportunity to try to work out a new arms-control arrangement with Moscow, which would ease some of the pressure to add to the nuclear arsenal, at least in the short run.

A greater challenge, however, comes from China, which rebuffed efforts during Trump’s first term in office and during the Biden administration to be drawn into nuclear discussions. One sign that Beijing might be prepared to take small steps to reduce nuclear risks came in September when it provided advance notice of a long-range ballistic missile test it conducted over the Pacific.

China, which was estimated to have about 200 operational nuclear warheads in 2018, is projected to have more than 1,000 warheads by 2030, most of which will be deployed on systems capable of reaching the U.S., according to a recent report by the Defense Intelligence Agency. As China’s force grows, the U.S. for the first time will need to deter two nuclear peers.

The Biden administration has taken a few steps to upgrade, but not enlarge, its nuclear force by announcing it would pursue a new and more potent variant of the B-61 gravity bomb. It also took steps to extend the life of Ohio-class submarines to hedge against delays in fielding its Columbia-class successor.

“We focused on a ‘better’ approach, not necessarily a ‘more’ approach,” Pranay Vaddi, the top nuclear official on the National Security Council said in a June appearance before the Arms Control Association, a Washington-based group that advocates for limits on nuclear weapons. “But let me be clear. Absent a change in the trajectory of adversary arsenals, we may reach a point in the coming years where an increase from current deployed numbers is required. And we need to be fully prepared to execute if the president makes that decision.”

China’s Economy Picks Up, but Still Needs More Help

Signs of some improvement after a recent wave of stimulus, though concerns about Trump loom

Chinese industrial production slowed slightly in October and the real-estate sector remained in a deep slump, data published Friday showed. But retail sales popped higher and investment in buildings, equipment and other fixed assets held steady.

Most economists think China’s economy is back on track to meet the government’s goal of around 5% growth this year, after authorities in September cut interest rates and pumped up the stock market with pledges of financial support. Last week, they announced a $1.4 trillion plan to help cash-strapped local governments manage their swollen debts.

But with President-elect Trump heading back to the White House, China’s economic outlook has darkened. Trump on the campaign trail said he would raise tariffs on all Chinese imports into the U.S. to 60%, a move aimed at narrowing the U.S.’s yawning trade deficit and rebuilding American manufacturing.

Economists say such a move, if enacted, would pummel China’s economy, especially if other countries followed suit with tariffs and other duties to shield their domestic industries from Chinese goods redirected from the U.S.

Weakening exports, long a bright spot for China’s economy, would pile pressure on Beijing to fire up domestic spending with further interest rate cuts and more government borrowing to finance extra spending. In particular, Chinese authorities will need to find ways to bring a drawn-out property crunch to an end and spur a durable revival in consumption, economists say.

In all, the boost to growth from easing measures so far is likely to prove short-lived unless there is “substantial” fiscal stimulus next year, Zichun Huang, China economist at Capital Economics, told clients in a research note Friday. “We think the economy will start to slow again by the second half of next year, by which point Chinese manufacturers will also be facing the additional headwind of a second trade war with Trump,” she wrote.

Figures released Friday show retail sales in China rose 4.8% in October compared with a year earlier, a stronger reading than the 3.2% increase recorded in September and the 3.7% growth expected by economists polled by The Wall Street Journal.

Consumption benefited from government programs aimed at persuading households to trade in old home appliances for discounted new ones. Given the still-fragile housing market and subdued consumer confidence, economists say it is too early to say if October’s pickup in retail sales marks the start of a durable rebound in consumption after previous false dawns.

Other data were less upbeat. Investment in buildings, equipment and other fixed assets rose 3.4% over the first 10 months of the year when compared with the same period in 2023. That matched the 3.4% rise in January through September, though it came under the 3.5% growth rate expected by economists surveyed by the Journal.

Industrial production slowed somewhat in October, rising 5.3% from a year earlier, compared with September’s 5.4% year-over-year increase, the National Bureau of Statistics said.

In the troubled real-estate sector, property investment fell 10.3% January through October compared with the same 10 months last year, a steeper decline than the 10.1% fall recorded January through September. New construction tumbled 22.6% in the first 10 months, also a bigger drop from the 22.2% decline reported for the first nine months of the year.

Average new home prices in 70 Chinese cities also declined last month, though at a slightly slower rate than in September, according to calculations by The Wall Street Journal based on data released by the National Bureau of Statistics.

Unemployment in October edged down to 5%, the statistics agency said, from 5.1% the previous month.

The automaker’s shares have been under pressure amid worry about a consumer shift away from fully electric vehicles

One of the most prolific activist investors in Japanese companies is targeting Nissan Motor 7201 4.68%increase; green up pointing triangle, setting up a corporate standoff that investors hope will translate into a higher stock price.

Singapore-based Effissimo Capital Management disclosed it had built a stake in Nissan Motor, days after the carmaker unveiled sweeping restructuring and cost-cutting efforts and in the wake of months of share-price declines.

Shares in Nissan Motor soared on news of the stake, rising more than 20% at one point on Tuesday. They rose again on Friday when Japanese magazine Diamond reported that another activist investor, Oasis Management, has also bought Nissan Motor stock. Oasis didn’t immediately return a request for a response, while Nissan Motor declined to comment.

Still, Nissan Motor stock is down more than 20% for the year, lagging Toyota Motor and Honda Motor.

Effissimo is known for often taking large stakes in prestigious Japanese companies—which are seen as insulated from public criticism—and shaking things up. An investigation proposed by the firm at a Toshiba shareholders’ meeting in 2021 led to a board overhaul before the industrial giant was taken private last year.

Last week, Nissan Motor revealed restructuring plans that include cutting 9,000 jobs globally and reducing its global production capacity by a fifth. It lowered vehicle-sales forecasts for all major markets, particularly in China and North America, two of its biggest markets. The company has been struggling with weak sales in recent months, especially in China, where a price war and a surge of local electric-vehicle offerings have hit foreign brands.

The carmaker’s stock also fell in July after disappointing first-quarter results.

Even before the earnings-related drop, the company’s shares had been under pressure amid worry about a consumer shift away from fully electric vehicles, a product the company had bet big on. After a global boom in EV sales, fired up in part by the popularity of Elon Musk’s Tesla and others, consumers in Europe and the U.S. have pulled back over their generally high price tags and the still-uncertain build-out of charging infrastructure.

Nissan Motor is also navigating a partial weakening of its once-powerful alliance with French peer Renault and Japan’s Mitsubishi Motors. Forged by Carlos Ghosn, the alliance’s former chairman and chief executive, bonds between Nissan Motor and Renault have frayed over years of acrimonious exchanges that surfaced publicly after Ghosn’s arrest in Japan in 2018 and the subsequent legal fallout.

Renault last year reduced its ownership stake in Nissan Motor. The Japanese carmaker last week said it would sell down its shareholding in Mitsubishi Motors and has said it is studying potential collaboration with Honda Motor on electric cars, core components and software.

Amid those headwinds, Effissimo made its move.

Nissan Motor, in a report filed Monday, said a trustee of ECM Master Fund was its fifth-biggest shareholder with a 2.5% stake as of the end of September. ECM Master Fund is managed by Effissimo. A representative for Effissimo has confirmed that it invested in Nissan Motor, but has declined to comment further.

Effissimo already held a 30% stake in Nissan Shatai, Nissan Motor’s specialty- and commercial-vehicle unit.

Effissimo is one of the most prominent activist investors in the Japanese market and is led by Japanese executives who have adopted Western practices such as seeking operational changes or board representation. The firm’s moves are followed closely by other investors and news that it has taken stakes in companies often triggers buying by others in hopes that the companies will carry out changes that are favorable to shareholders.

Some analysts say the market may be overly pessimistic about Nissan Motor, potentially giving Effissimo an easy win. Fumio Matsumoto, chief strategist at Okasan Securities, said Nissan Motor’s earnings may improve going forward as the company slashes costs and introduces new models.

“[Effissimo] may have thought there might be good opportunities to sell the shares” down the road, Matsumoto said.

Nissan has said it appreciates “all existing and new shareholders that support and believe in the future potential of Nissan.”

Activist investors, once shunned by Japanese management, have gained more mainstream recognition over the years as the government presses companies to communicate better with investors as part of efforts to spur investment in Japan and revitalize the market. Financial regulators, meanwhile, have been pushing for companies to include more independent directors, exposing corporate management to more outside influence.

At Toshiba, one of Effissimo’s highest-profile investments, it unsuccessfully sought board seats for its founder and executive director Yoichiro Imai and two other individuals. It then proposed an investigation to look into whether the shareholders’ meeting was conducted fairly. The report issued as a result of the investigation alleged Toshiba collaborated with Japan’s Ministry of Economy, Trade and Industry to block foreign shareholders from gaining board influence.

Toshiba and the ministry declined to comment in detail on the report’s allegations at the time. Toshiba said at the time that it would use the lessons of the report to enhance transparency, while the head of METI said it was acceptable for government officials to talk to companies about national-security implications of shareholder actions.

Effissimo has also invested in companies like major shipper Kawasaki Kisen and insurer Dai-ichi Life Holdings.

Ryuhei Uchida, an Effissimo director and critic of some of Kawasaki Kisen’s management decisions, joined the shipper’s board in 2019 following a deterioration in its earnings. Kawasaki Kisen’s earnings have since improved, backed by the strength in its container-shipping business.

Dubai retailer sees changing appetites in the Middle Eastern market, where consumers historically favoured almost exclusively new models

Two years after Rolex launched its Certified Pre-Owned programme, Dubai-based retailer Ahmed Seddiqi & Sons is taking the CPO concept beyond second-hand and into the realm of highly collectible vintage pieces — some more than 50 years old.

Next week, Seddiqi will open its first Rolex CPO store specialising in vintage models, in Dubai’s Wafi Mall. It has taken a site adjacent to its existing Rolex boutique and joined the two units to create an integrated sales space with around 120 vintage CPO pieces on display at any one time. Currently, Seddiqi has an inventory of about 400 pieces, to which it is constantly adding.

The initial outlay has been considerable. Chief executive Mohammed Seddiqi says he has spent in excess of $10mn on stock and a further $500,000 on servicing to meet Rolex’s CPO criteria.

Historically, the Middle Eastern market has concentrated on new watches but Seddiqi believes that, thanks to social media and the rising popularity of the biennial Dubai Watch Week event — organised by his company — appetites are maturing and the time is right for CPO.

“We started hunting for watches two years ago, on the local market and internationally,” Seddiqi says. “Our focus was totally different to any other certified, pre-owned concept existing in the market. If you go into a store that offers Rolex CPO, you will always see the Submariner, the Daytona, the GMT Master, the Explorer. We decided to look a little bit further and enhance the collection by searching for pieces that are even rarer than the Professional models.”

Accordingly, Seddiqi has focused on the Day-Date, a watch that enjoyed great prestige in the Gulf region 50 years ago and often featured exotic stone dials and lavish gem-setting on dial, case, and bracelet.

“Surprisingly, we found watches that are, in some cases, in ‘new old stock’ condition. People received them as gifts in the 1970s or the 1980s, and they were just kept in their drawers for all these years without them even touching them, and without them knowing what the value is now,” Seddiqi says. “Just 10 or 15 years back, people would have bought these watches for the gold value, not even the diamond value.”

Not any more. “Day-Dates will be starting at $35,000-$40,000, going all the way up to $300,000-$400,000 depending on the dial, [gem] setting and rarity,” Seddiqi says. “For the moment, we are thinking of very low margins — maximum 20 per cent — for us to understand what the market is looking for. We’re making less money, but I think Rolex made a good move introducing CPO, because they want to control the secondary market.”

The scheme treats pre-owned much as if it were a new product, with the reassuring presence of all the familiar retail appurtenances: box, papers, swing tag, and a two-year guarantee. “The vintage market is a market of initiates, not a market of shoppers,” says Remy Julia, head of watches at auction house Christie’s in Dubai. “The [United Arab Emirates] is the total opposite: it’s a market of shoppers in the mall buying watches with box and papers from the brand directly.”

He believes Seddiqi’s new venture will bring vintage to a wider public. “People were hesitant regarding the pre-owned market due to so many reasons: authenticity, ownership, watches that have been serviced over the years without original parts, and so on,” he says. “So, the fact that Rolex and Seddiqi have completely embraced the CPO project will give a boost of confidence for the overall [vintage] market.”

It is a market for which Seddiqi has great expectations. “Five years down the line, I believe that this is going to be an important business unit within Ahmed Seddiqi & Sons and also an important business worldwide,” he says. “We don’t know the exact number of Rolexes produced each year; some people say a million. But, looking at the global population, even a million new watches is not enough.”

During the past two years, Rolex has extended its CPO programme to around 70 retailers around the world, all of which have the ability to set the prices for their second-hand stock without any involvement from the brand. Watches are on sale at Rolex-owned Bucherer, and the scheme is proving popular with other, particularly large-scale, retailers such as US-based Tourneau, Watches of Switzerland, and The 1916 Company.

Brian Duffy, chief executive of Watches of Switzerland, says the premium on desirable CPO-eligible watches — which must be at least three years old — is between 10 and 70 per cent above its retail price, depending on the model.

Purchases of vehicles from Asian nation’s automakers reach fresh records as Russians ‘vote with their wallets’

Sales of Chinese cars in Russia have hit fresh records after the country became the largest export destination for the Asian nation’s automakers when sanctions forced western brands to cut ties with Moscow.

Surging in Russian sales have helped Chinese carmakers at a time when Beijing faces higher tariffs on electric vehicle exports from Washington and Brussels — while engineering a rapid change in Russian auto culture.

“People are voting with their wallets,” said Ilya Frolov, a car blogger based in Moscow. “If you’re buying a car, your choice is either a [Russian-made] Lada or an extremely expensive European car brought in as a grey import, or a very well equipped and relatively cheap Chinese one.” 

Moscow’s full-scale invasion of Ukraine sparked a sharp decline in sales of vehicles from the European, Korean and Japanese carmakers that previously dominated the country’s car market.

At the time of the full-scale invasion in February 2022, their brands made up 69 per cent of all sales, according to the Avtostat analytics agency. They now have a market share of just 8.5 per cent, while Chinese manufacturers’ share over the same period has risen from 9 per cent to 57 per cent. 

In the first nine months of 2024, Russia was the largest export destination for Chinese-built cars, with the volume reaching 849,951 vehicles, according to data from the China Passenger Car Association, an industry group. The second largest destination, Mexico, imported less than half that number.

“China’s stellar auto export growth in recent years mainly relies on contributions from the Russian market,” said Cui Dongshu, general secretary of the CPCA. “Dramatic fluctuations and changes in the competitive landscape of Russia’s auto market have provided Chinese car companies with ample selling opportunities and huge profits.”

About 90 per cent of the Chinese vehicles being sold into Russia have internal combustion engines, though more than 15,000 cars manufactured by Li Auto, an electric vehicle maker specialising in spacious hybrid SUVs, were sold in Russia in the first eight months of 2024.

The expansion of China’s presence has been so big that not only customers but industry professionals have rushed to the new companies.

“Almost everyone [who used to work for western companies] is now employed by Chinese ones,” said Vadim Gorzhankin, the Moscow-based director of PR agency Krasnoe Slovo, which works with the car industry. “At first, we knew close to nothing about who these producers were, how to work with them, or even how to pronounce their brand names.”

Chinese customs data show its carmakers exported $1.8bn-worth of cars to Russia in September, the most recent month for which complete figures are available, compared with $96mn in the same month in 2021.

While unofficial car dealers still wheel familiar western brands into the country through parallel import routes, high-price tags have put the brakes on their established customer base. 

In Germany, drivers can buy a BMW X5 30d for about $95,000, according to the official company website. Prices for the same model range from $152,000 to $203,000 in Russia, according to the Auto.ru online marketplace.

A comparable Chinese-made Exeed VX costs about $56,000. Its manufacturer Chery is one of the best-selling brands, along with Great Wall Motor and Geely.

Some Chinese automakers have been tight-lipped about their involvement in Russia, attributing the growing presence of their cars on the country’s streets to a grey market operated by parallel traders.

Zeekr, an EV brand carved out of Geely, said in a statement that it has never appointed any dealers or distributors within the Russian Federation. “The few vehicles being seen in the Russian market [are] an individual behaviour,” the New York-listed company added.

Li Xiang, founder of Nasdaq-listed Li Auto, wrote in a social media post last year that the company did not “have any representatives overseas”, though he added that the company could not limit “demand” for private parallel exports shipped to Central Asia and the Middle East.

Frolov, the car blogger, ditched his Mercedes CLA and bought a grey import of a Zeekr X, retailing at $46,161, which can make it out of a tight parking spot at the tap of a button on his phone — a feature similar to that of the BMW 7 Series.

He said he was sold on the “wow factor” offered by Chinese producers, noting that the Huawei-backed Aito M9 has a pull-down screen similar to BMW’s luxury i7 that can project films for passengers in the back seat. “This car is a spaceship compared to a Rolls-Royce, which doesn’t have any of that fun stuff,” he said. “It has a very conservative design, small screens.”

The cars’ only fault is they are more vulnerable to theft, Frolov said. “There is less crime in China, so they don’t have the same security standards.” 

Not all Russian drivers are pleased, however.

A union of Russian taxi drivers in October complained to Russian newspaper Kommersant about problems the industry has experienced since switching to cheaper models of Chinese cars.

Taxi drivers claim the Chinese vehicles often have to be written off after being driven 150,000km, while European and Korean brands used to last for up to 300,000km. Obtaining spare parts for repairs can also take a long time, the union noted.

China’s increasing dominance has also angered some domestic producers — especially those that have had to funnel more of their resources towards arms production.

Sergei Chemezov, the chief of Russia’s most powerful weapons maker Rostec, has called on the state to impose “protective measures” on Chinese vehicles. His company has a stake in Russia’s largest car manufacturer, Avtovaz, makers of Lada, which in September said its share of the market was likely to drop to 25 per cent following the surge in sales of Chinese vehicles.

The country’s car manufacturers have been hard hit by sanctions, which have limited access to western parts and technology. To compensate, they too have often turned to China.

Earlier this year, Russian prime minister Mikhail Mishustin hit out at a man who showed the new Volga model at a business conference, after it emerged that the vehicle’s steering wheel was made in China.

“Where is your steering wheel made? Chinese? I want the steering wheel to be Russian. It’s not as difficult as localising the gearbox and all the other elements,” the premier was reported by RBC, a business newspaper, as saying.

The trading relationship between Russia and China is lopsided. China, already the Kremlin’s top trading partner before Russia’s full-scale invasion of Ukraine in 2022, now accounts for more than half of all official exports to Russia, according to Trade Data Monitor. In September, just 5 per cent of China’s total imports came from Russia.

“The direction of travel is very much towards Russia being more dependent on China,” said John Kennedy, expert on Russia at Rand Europe research institute. 

“There is obviously a geostrategic partnership between China and Russia,” Ilaria Mazzocco, a senior fellow at the Center for Strategic and International Studies. “But there are also commercial interests developing, and likely very entrepreneurial actors on the Chinese side that are taking advantage of how the market has changed in Russia.”

Analysts believe the growing volume of trade between Russia and China could make it harder to spot Moscow’s shadow imports of sanctioned goods, which in the past stood out in the trade data of smaller transit countries. 

Immediately after the full-scale invasion, “everyone quickly understood that Russia evades sanctions through former Soviet countries”, said Alexandra Prokopenko, fellow at the Carnegie Russia Eurasia Centre. “But China trades in such high volumes and with such opaque statistics that no one understands anything. A lot of things can be hidden.”

Grubhub founder made $1bn proposals to buy company back from Just Eat Takeaway

Revelation comes days after Dutch group announced sale of its US subsidiary for $650mn

The founder of Grubhub said he twice attempted to buy back the food delivery business from Just Eat Takeaway for more than $1bn, making the revelation days after the Dutch group announced a deal to sell its US subsidiary at a huge loss for just $650mn.

Matt Maloney, who co-founded Chicago-based Grubhub in 2004, told the Financial Times that he led an effort to buy the US unit around the start of this year and in early 2022, with backing from “internationally known” private equity firms.

The details of these previous approaches come after JET on Wednesday said it had struck a deal to sell Grubhub for an enterprise value of $650mn to US-based Wonder Group, years after buying it for $7.3bn at the height of the pandemic-driven food delivery boom.

The announcement marked the culmination of JET’s two-year plan to unwind its 2021 takeover of Grubhub, after it came under shareholder pressure that year to sell assets. In April 2022, JET said it was exploring a full or partial sale of the subsidiary a year after the acquisition, saying at the time it had received unsolicited takeover approaches.

Maloney, who led Grubhub as chief executive before it was sold to JET, said that both times he issued written proposals for more than $1bn.

“Both were rejected by JET management. After the second attempt I was told that [JET chief executive] Jitse [Groen] was not interested in selling the company back to me so I stopped trying and no one reached out to me or my financial partners around the time of this deal to inquire if we would beat this offer,” he said.

Maloney added he was excited for Wonder’s plans for Grubhub and for the company to enter a new chapter.

Maloney joined the company’s management board following the completion of Grubhub’s acquisition in June 2021 and stepped down that December. A person familiar with the matter said Maloney had minimal contact with the company since his exit.

JET said in a statement there were “two private equity approaches that had some involvement of Mr Maloney in 2022 and 2023”, adding that “neither were declined by Just Eat Takeaway with the respective firms retracting themselves post due diligence”.

It said the company, together with its advisers, had “engaged with a large number of interested parties and have entertained all approaches for Grubhub in the past years” and was pleased to have now successfully agreed an acquisition of Grubhub by Wonder.

Shortly after JET’s acquisition of Grubhub, the company in 2022 wrote down its value by €3bn. Last year, it posted a €4.6bn impairment charge that included writedowns for the subsidiary as well as Just Eat’s merger with Takeaway in 2020. JET in February booked another €1.5bn impairment charge from past acquisitions.

Under the terms of Wonder’s acquisition of Grubhub, the unit will be transferred with its $500mn of senior notes and is expected to result in net proceeds of up to $50mn after customary adjustments for JET.

On Wednesday, Groen said the sale would increase JET’s cash generation capabilities and accelerate its growth.

Shares in the food delivery company rose 20 per cent in morning trading in response to the agreement. However, its market capitalisation is around €3bn as its shares have fallen almost 90 per cent over the past four years.

Grubhub generated gross transaction value of €8bn, adjusted earnings before interest, taxes, depreciation and amortisation of €94mn and free cash flow before changes in working capital of negative €77mn in the financial year to the end of December 2023.

Francesco Mazzagatti being sued by API, part owner of Iranian petrochemicals company

The chief executive of a North Sea oil and gas group faked bank statements and forged board documents to steal at least €143.8mn, according to a London lawsuit filed by his former company and backer of an Iranian petrochemicals maker.

The High Court claim is one of several legal battles around the world that have entangled Francesco Mazzagatti, an Italian national who is the chief executive and majority owner of Viaro Energy. The company, and Mazzagatti, became significant players in the UK energy market after it bought RockRose, a listed group with assets in the UK and Dutch North Sea, for £247mn in cash in 2020.

Mazzagatti, and Viaro’s chief financial officer, Francesco Dixit Dominus, are being sued in London by the Singaporean trading company that Mazzagatti once owned, Alliance Petrochemical & Investment (API). It claims its former boss may have “used at least part of the misappropriated funds to acquire a majority share in RockRose Energy”.

Mazzagatti and Dixit Dominus deny the claims.

API — where Mazzagatti was chief executive between July 2018 and September 2020, according to the company — part-owns the Mehr Petrochemical Company (MHPC) in Iran and is a distributor of its products, such as polyethylene.

Just months after becoming chief executive, Mazzagatti incorporated a new company, Alliance Petrochemicals Trading (APT), in the Gulf state of Sharjah “without the knowledge of API’s other directors”, the company alleges in the London lawsuit.

He then faked a board resolution authorising him to open APT bank accounts with himself as the sole signatory. Customers of API then paid into a string of accounts across Singapore and the United Arab Emirates that were set up and controlled by Mazzagatti and Dixit Dominus, in exchange for products from the Iranian company, MHPC, according to the claim.

“The full extent of the fraud carried out by the defendants is not known to the claimant,” API alleges. But it calculates that at least €143,808,798.66 was misappropriated, which the company says represents the total amount owed to MHPC by API by August 2023 in exchange for its petrochemicals.

API claims the pair covered up the misappropriation through “false representations” to the board. In 2021, following a meeting in Dubai, Mazzagatti “produced a false bank statement” to show that there was a balance of nearly Dh100mn (€25.8mn) being held in an account in the UAE. He had previously told API’s other directors that the instability in the Middle East meant it was “better for the funds owed to MHPC to be held outside Iran”.

A court in Tehran already ruled in May 2023 that MHPC should not deliver any more products to API and that API owed the Iranian company approximately $170mn, according to the London lawsuit.

The High Court claim also alleges that Mazzagatti may have “used at least part of the misappropriated funds to acquire a majority share in RockRose Energy”. To help secure the deal, Viaro relied on a £250mn loan guarantee from Sheikh Zayed bin Surror bin Mohammed Al Nahyan, a member of the Abu Dhabi royal family, according to the claim.

This helped calm objections from Taqa — Abu Dhabi’s state-owned electricity and water company, which was involved in a joint venture with RockRose — that Viaro would use RockRose’s cash balances to pay for the deal, leaving the North Sea company unable to meet its liabilities, including the decommissioning costs of the joint ventures, the claim alleges.

Subsequently, RockRose went on to loan approximately £202mn to Viaro to fund the deal, with the remainder of the £247mn purchase price being made up from the misappropriated funds, the claim alleges. This is denied by Mazzagatti.

Taqa has since brought a separate claim in the High Court against Viaro and Mazzagatti, along with other defendants, alleging that RockRose declared an $84mn dividend shortly before selling an oilfield for $1 without the means to meet its liabilities. The defendants deny the claims in the Taqa lawsuit. There is yet to be a judgment.

In response to API’s claim, Mazzagatti and Dixit Dominus deny any misappropriation of funds and say the lawsuit is being orchestrated by a third party, Arshiya Jahanpour, a former close friend of Mazzagatti, who urged him to buy API on his behalf. Jahanpour then became frustrated by the Italian’s decision to subsequently sell him only half of the trading company, selling the other 50 per cent to another friend, Nejla Baccouche, according to defence arguments.

The defence states that it was Jahanpour, not Mazzagatti who had “sole control” of API from around September 2018 onwards. Neither Mazzagatti nor Dixit Dominus “is responsible for any unlawful payments”, according to the defence. Instead, it argues that API is seeking to “(wrongly) blame or ascribe liability to the Defendants for transfers that were either legitimate, or alternatively must have been a procurement of funds by Mr Jahanpour”.

The defence alleges that the various bank accounts opened by Mazzagatti were “opened by or at the request of Mr Jahanpour, and Mr Jahanpour controlled them at all material times [ . . .] Mr Jahanpour was worried about having assets in his own name, including due to increased scrutiny because of his US citizenship.” It adds that Mazzagatti trusted Jahanpour enough to allow him to use his name “but was not involved in the operation of the accounts”.

Jahanpour could not be reached for comment.

A trial date is yet to be set.

Billionaire says consolidation should be permitted and adds that ‘allowing Big Tech to run wild’ is inappropriate

John Malone, the pre-eminent dealmaker in the media and technology industry, is pressing for merger activity amid an anticipated rollback of regulations under the incoming administration of Donald Trump. 

Charter Communications, the cable television and broadband company that has just agreed to buy his Liberty Broadband, should be allowed to merge with rival cable operators Comcast, Cox or T-Mobile, the billionaire “cable cowboy” told investors on Thursday.

“The idea that Charter should be limited to 30 per cent of the US terrestrial footprint while Big Tech has the globe, and even Elon [Musk] has the globe, is silly,” the Liberty Media chair said. “Tying an industry’s hands behind its back and allowing Big Tech to run wild in every direction that they choose to run in, I think is inappropriate.”

Malone’s pronouncement comes as mass media companies have struggled for years due to the disruption of linear television. Companies such as Warner Brothers Discovery have lost a huge share of their business to streaming services, leading to billions in writedowns and attempted mergers, like satellite TV provider DirectTV’s now-abandoned purchase of Dish.  

Trump’s anticipated dismissal of Federal Trade Commission chair Lina Khan and Department of Justice chief Jonathan Kanter has spurred hopes among media executives grappling with deflated share prices that tie-ups may escape harsh antitrust scrutiny. This is despite indications that the new White House administration is likely to continue strict enforcement of media deals.

David Zaslav, WBD’s chief executive, said earlier this month the new administration might offer a “change of pace” and an opportunity for a wave of consolidation.

Malone’s comments came a day after he announced he would simplify his media empire by spinning off event ticketing company Live Nation and events specialist Quint from Liberty Media into a separate public company following a wave of legacy media companies looking to clean up their corporate structure amid a wave of anticipated dealmaking.

Last month, broadcaster Comcast said it was weighing a spinout of its cable networks.

The remaining Liberty Media will focus on sports, following its $8bn acquisition of Formula One in 2017. The 83-year-old Malone will step in as interim CEO after the departure of prolific dealmaker Greg Maffei, who said he would step down as CEO after nearly 20 years at the helm.

The undercover hedge funds financing activist short sellers

When Wall Street’s self-styled financial detectives allege malfeasance, these silent partners stand to reap the benefits

In January 2023, short seller Hindenburg Research put out a report claiming that executives at one of India’s largest conglomerates were manipulating the company’s stock price.

The Adani Group and its multibillionaire founder Gautam Adani strenuously deny the accusations, but the report instantly wiped off as much as $140bn from the conglomerate’s market value and sent ripples through the country’s establishment. It also catapulted the New York-based Hindenburg and its founder Nathan Anderson into Wall Street lore.

Few saw it coming. But one that did was a hedge fund in New York almost 13,000 kilometres away from the Indian conglomerate’s headquarters.

Kingdon Capital Management had received a draft of the short seller’s report in November 2022 as part of an agreement it had signed with Hindenburg a year earlier, India’s markets regulator revealed in June.

The hedge fund, which was founded by Mark Kingdon in the 1980s, had set up a special fund in Mauritius and had started building a short position on Adani two weeks before Hindenburg released its report.

Kingdon, which has less than $1bn in assets under management, turned a $22mn profit from the trade. As part of the agreement, Hindenburg received a 25 per cent cut of the spoils. 

The Securities and Exchange Board of India’s unmasking of Kingdon as the financier behind one of the most talked about short positions in recent memory has cast a spotlight on the world of activist short selling.

In particular, it has invited scrutiny of the financial agreements between the forensic research firms such as Hindenburg that do the digging and the secretive hedge funds like Kingdon that act as their silent partners to fund these trades. Hong Kong-based fund Oasis Management and Toronto’s Anson Funds Management have also operated in this market.

While traditional short sellers seek out overvalued companies to bet against, often balancing them against long positions in the same sector, activist short sellers tend to explicitly look for evidence suggesting malfeasance. 

Hindenburg, for example, says that it seeks out situations where there might be some combination of accounting irregularities, undisclosed related-party transactions, and illegal or unethical business or financial reporting practices.

The New York-based firm was the first to allege fraudulent behaviour at electric truck maker Nikola, whose founder Trevor Milton was eventually convicted of securities and wire fraud. It also called Nigeria’s Tingo Group “an obvious scam” six months before US regulators charged the founder with “massive fraud”.

Not content with waiting for price discovery to show up in the markets, activist short sellers blast out their findings through interviews, social media campaigns and publishing research reports. 

Their approach has divided the market. To some, they are a necessary voice of reason that counteracts the animal spirits driving market euphoria, especially during periods of heightened monetary stimulus. 

“It’s hard to be a stock picker in this environment because as money comes into the market it lifts all boats,” says Anderson, who founded Hindenburg in 2018. “The frauds get bigger and more resilient to evidence.”

But a criticism from their detractors is that activist short sellers working together to sow fear, uncertainty and doubt about a company’s operations can become a self-fulfilling prophecy, moving markets just by revealing a bet against a particular company. This approach is akin to “walking into a crowded cinema and shouting fire”, one long-only investor says. 

Now, the hedge funds who have quietly funded the trades are coming under increasing regulatory scrutiny, with some already accused of failing to disclose agreements to their investors — potentially threatening a subsystem of traders who view themselves as performing a vital service in keeping Wall Street clean.

Carson Block, founder of short seller Muddy Waters, laments the fact that the regulatory regime in the US is both “over-policed” — increasing paperwork requirements and mounting costs, which disproportionately hurts smaller players — and “under-policed in the sense that nobody who was doing things wrong at large scale was ever meaningfully punished”.

He says: “The regulators just don’t pursue the big fish when it comes to corporate malfeasance.”

The activist cohort has risen as more traditional short sellers have fallen by the wayside.

Last November, renowned short seller Jim Chanos, a self-styled “real-time financial detective”, told his backers he was closing his main short-focused hedge funds after more than three decades. A short-only portfolio was an increasingly tough sell to investors, he said. Assets in his firm Kynikos Associates had plummeted from a peak of $7bn at the end of 2008 to less than $300mn. 

“The longer markets stay ebullient and stay elevated, particularly in the US, the fewer people think they need hedged products or any type of funds that might provide protection to the downside,” Chanos tells the Financial Times.

He is not alone. Many short sellers had their wings clipped by the decade-long bull run that followed the financial crisis. Bill Ackman swore off short selling in 2022 after a five-year battle against global nutrition company Herbalife during which he lost close to $1bn.

David Einhorn, who raised concerns about Lehman Brothers’ risk practices prior to its collapse, has, like Chanos, been curtailed by an unsuccessful wager against Elon Musk’s electric car company Tesla.

Investors, meanwhile, have pulled almost $130bn from equity hedge funds since 2016, according to data provider Hedge Fund Research. 

“Since the global financial crisis there’s been a long bull market that has made short selling very difficult,” says Whitney Tilson, a hedge fund manager who closed his firm in 2017 out of frustration that his short book was underperforming. Tilson now provides investment advice through a newsletter with one top tip: avoid short selling entirely. 

But some continue to carve out a successful, albeit controversial niche in activist short selling. Much of the credit for the emergence of these funds, according to several members of their cohort, goes to Muddy Waters and Block.  

A fast-talking accounting nerd known as much for his forensic investigation skills as he is for his liberal use of expletives, Block launched Muddy Waters as a research outfit in 2010. It was named not for the blues guitarist, but after the Chinese proverb “muddy waters make it easy to catch fish”.

The firm published a report on a Chinese business called Orient Paper, and Block borrowed $2,000 on his credit card to bet against the company. The report went viral and Block was soon fielding calls from investors who offered to pay for his research before publication. 

This heralded the arrival of so-called balance sheet arrangements, whereby the likes of Muddy Waters and Hindenburg are often paid to generate ideas. They are in effect a profit-sharing agreement whereby the research firm takes a cut of the winnings made on the trade. The contracts are typically negotiated individually, principally based on a firm’s record. 

The cut ranges from 15 per cent for newer entrants to the practice, to 35 per cent for more established players such as Hindenburg, according to market participants. 

Hindenburg was set to receive 30 per cent of the profits Kingdon made from the Adani position, according to the Indian regulator, but the hedge fund renegotiated that down to 25 per cent.

There are several benefits for activists, particularly those who are just starting out and need money to execute their ideas. 

“You have an idea and if you do well, everyone does well,” says an activist short seller who frequently uses the arrangements. “If you’re someone with really unique and interesting ideas and you don’t work at an individual fund you can piggyback off a larger infrastructure where they have a lot more sophisticated trading.”

But often they have little option but to enter into these agreements. Finding a bank that will act as a counterparty to the short trade can be difficult either because of size or headline risk. Large banks who cater to the very clients that short sellers target do not necessarily want to be seen as being in bed with the enemy.

Using a profit-sharing agreement can circumvent this issue because a larger, more established hedge fund that has pre-existing relationships with banks can put on the trade. 

But there are also drawbacks for the activists relying on what is inherently an unreliable income stream. It is almost exclusively dependent on reputation with no locked-up capital or investor funding to fall back on if a report does not land. 

“You have the flexibility to work on a name and dive into it for months at a time but the downside is that you don’t have a lot of stability,” says the activist short seller who has used the arrangements. “It’s an easier business to do if you don’t have three kids in private school.”

Activist short sellers tend to relish being in the spotlight but that comes with its own difficulties, including legal and at times physical threats. “They all fall into the lower-middle-class, chip-on-the-shoulder category,” says one hedge fund source. “They want to make money and show the world they are right and spit in the eye of the man.”

For the hedge funds involved — the balance sheet providers — backing the work of activist short sellers allows them to take potentially lucrative positions without attracting attention for being a market contrarian.

Short sellers are largely viewed by corporate America as a blight on the market. Retail investors often dislike them too, and increasingly have the ability to mount so-called short squeezes against them. Melvin Capital, which had more than $12bn in assets in January 2021, was forced to shut down entirely just over a year after retail traders pushed up the share price of video game retailer GameStop and cost the firm billions of dollars in one of the most well-executed short squeezes in history.

Many short sellers tend to build long-term relationships with hedge funds. Kingdon, for example, has received seven reports from Hindenburg and traded on five of them, according to Indian regulators.

Among those who have quietly backed activist short sellers is Oasis Management, a Hong Kong-headquartered hedge fund whose main activity is buying stakes in companies and pushing for changes it hopes will help increase the share price. 

Oasis has bankrolled trades for some of the best-known activist short sellers including Muddy Waters — with which it has a long-standing relationship — as well as Texas-based Blue Orca Capital and Viceroy Research, co-founded by British short seller Fraser Perring, according to multiple people familiar with the firm. 

Perring’s deal with Oasis came to light in late 2022 after South Africa’s Financial Sector Conduct Authority tried to fine the short seller over a report it had published in 2018 on Capitec, at the time the country’s fourth largest bank.

Oasis made millions on the trade, according to South African regulators, a small portion of which was shared with Viceroy. Capitec recovered quickly from the report and its share price has since increased by around 300 per cent.

Some short sellers see the clandestine nature of balance sheet arrangements as “morally fraught”.

“There should be disclosure of [the] arrangement,” says Matthew Earl, chief investment officer at hedge fund Shadowfall, who highlighted financial irregularities at Wirecard prior to its collapse. “I don’t believe that cuts it in terms of the required disclosure and so effectively what you have is a fund transferring the [reputational] risk and regulatory scrutiny to the other party and not disclosing the fact that they stand to benefit.” 

Regulators and the US government seem to agree. Spurred on by banks, corporations and even other short sellers, they are beginning to take action against such funds. 

The Department of Justice and the Securities and Exchange Commission launched a wide-ranging investigation into short selling in 2021, including relationships between hedge funds and researchers. Block was among the most high-profile figures to be served with a search warrant by the FBI, though many of his peers were also investigated.

The investigation is continuing but in June, the SEC hit Toronto-based Anson Funds Management, a firm with $2.5bn in assets, with a just over $2mn fine in part for disclosure failures that “rendered its statements about its short strategy misleading.”

A month later the DoJ accused Citron Research and its founder Andrew Left of reaping $16mn in profits from running “a long-running market manipulation scheme and concealing “financial relationships” with hedge funds. The SEC filed a similar complaint in which it identified Anson as one of the hedge funds.

A lawyer acting on behalf of Left said he did not “have a balance sheet arrangement” with Anson and that the DoJ’s allegations related to “a short trade that Left made through Anson, which was a good trade so Anson had to pay him the proceeds of his investment”.

The cases have amplified calls for more transparency around short selling by having traders disclose positions once they get to a certain threshold or be forced to sit on their bets for a set period of time after they release their report. 

The SEC has introduced two new complementary rules on short selling, set to take effect early next year. Short sellers and lenders will have to quickly disclose deals to borrow securities while some institutional investors will be required to report short selling activity beyond a certain threshold, which is then shared publicly. Both are being challenged in court by a coalition of hedge fund groups.

Most short sellers have remained defiant in the face of the regulatory interest. “Nate [Anderson]’s research moves stocks, as it should,” says Tilson of the Hindenburg founder. “I wish there were a hundred more of him because there are a hundred times more fraud and promotion.”

Hindenburg has continued to publish reports, including about India’s regulator itself, alleging that Sebi chair Madhabi Buch was conflicted because of prior investments in Adani companies. Buch has called the claims “baseless”. Block still uses the arrangements himself at times, but has also provided funding for other short sellers.

When asked what pushes short sellers to do this work despite the obvious challenges, one activist suggests they are driven by a higher purpose.

“The people that practise this at a high level, why do we continue to beat our heads against a wall doing something that is incredibly difficult, comes at such a cost and is 10 times the work? There has to be something beyond the money . . . the reason that scams and frauds exist is because people say nothing and they’re too scared.”