Sahm Adrangi made his first splash in the financial world by short selling fraudulent Chinese companies listed on American exchanges, reporting his detailed research, then cashing out when the companies tanked. Kerrisdale Capital has made a name for itself through savvy research and selling short. In just three years, Kerrisdale grew from an initial $300K into a hedge fund with more than $250 million of assets.
In late spring of 2016, Adrangi gained media attention when he announced he was taking his strategy honed with the Chinese short sales to target a large U.S. public company. Hedge fund managers often take positions, e.g., energy will take a hit and proceed to invest accordingly. To zero in on one company with such high stakes is unusual. But, his research struck a chord with enough investors looking for alternative strategies that he was able to raise $100 million in assets to set his plan in motion.
A month later, Adrangi revealed the company in question, The DISH Network, and that his Kerrisdale fund had already been shorting stock. After exploring the regulatory requirements of DISH’s acquisition of licenses for broadcast frequency spectrum, Adrangi suspects the company will not retain its current value.
He makes a strong case that a significant portion of DISH’s value is based on the value of those licenses. His position is two-fold: 1) the licenses are not worth as much as currently valued in the market and 2) DISH cannot possibly meet the customer-coverage in the timeframe the licenses demand. The next logical step, in Adrangi’s view, is that the FCC will pull the licenses, and DISH’s stock value will drop as a result.
What puts Adrangi in a different category than other hedge fund managers — and Wall Street, in general — is his penchant for using social media to support his investment ideas and — with luck — push them to create positive results. Wall Street looks askance at social media as part of their marketing strategies, a decidedly odd position for a financial industry that can’t seem to get enough of tech.
— Sahm Adrangi (@SahmAdrangi) November 21, 2016
Not Adrangi. He’s learned to play the media game the way the big firms do, only with the immediacy of social media — he’s a big fan of Twitter — and targeting little-known companies that do not always get major attention. Where large firms build support for their investment ideas through major media announcements at high-profile events hoping to see a pay-off in the days that follow, Adrangi takes to Twitter and his email list of dedicated followers to build his own momentum.
The DISH Network play takes this strategy to a new level. At a valuation of nearly $30 billion, it’s not a small company flying under the radar. Sahm Adrangi built interest in his investments by making an announcement that the press picked up on, followed by an appearance on CNBC for the big reveal. He then took to the internet with his research and a website outlining his position. He routinely sends out newsletters to his followers.
Ironically, when Kerrisdale Capital made its announcement about the DISH short sale, the stock went up — not something anyone wants to see when shorting. But the past few years have not been kind to DISH either, with missed earnings in 2017 and a hemorrhaging of its satellite customers. The initial gains of mid-2016 have been completely wiped out. Investors from several corners of the market are questioning its value — and its future.
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 uncertainty and losses mount for DISH, time seems to be favoring Kerrisdale’s patience.