GameStop Short Seller Citron to Stop Advising Traders to Short Companies

Citron Research, one of Wall Street's most famous short sellers, says it will no longer publish short reports and focus on more optimistic long positions.
January 29, 2021, 4:54pm
GameStop Short Seller Citron to Stop Advising Traders to Short Companies
Bloomberg / Contributor

In a video released Friday morning, Citron Research—the short seller that helped spark the GameStop short squeeze—announced it would no longer publish investment reports on shorts, and instead focus on long positions.

Citron Research publishes investment reports that traders look at and take into consideration when they trade. Notably, Citron was most famous for its reports on “shorts,” which is when a firm is essentially betting on a particular company failing. Citron is a particularly famous short seller and its founder, Andrew Left, was called “The Bounty Hunter of Wall Street” in a 2017 New York Times profile that described him as an “activist” short seller. In other words, not only did he short companies, but he would publicly say so and then publish reports to convince other people that a company was bad, too. So, it’s pretty notable that now Left is pivoting away from short reports. 

The rally pushing up GameStop, AMC, and other Reddit YOLO stocks was partially animated by a deep hatred of short sellers, and Citron in particular became a villain among the r/WallStreetBets crowd due to its reputation and GameStop shorts. Now, it appears the company is attempting to pull off a face turn by focusing on “long” positions in its research offerings, which are bets that a company will succeed, typically by buying and holding their stock. 

"After twenty years, we noticed something. While we started Citron to be against the establishment, we actually became the establishment," said Andrew Left, Citron's head, in the announcement. "As of today, Citron Research will no longer be publishing what could be considered as short selling reports. The Citron narrative is going to change and have a pivot."

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On January 22, Left wrote in a now-deleted tweet that Citron would stop commenting on Gamestop after it abandoned the stock due to an “angry mob” that he said “[committed] multiple crimes that I will be turning over to the FBI, SEC, and other governmental agencies.”

In Friday’s announcement, Left claimed that the value Citron had brought to investors and the public over the decades by uncovering fraud and decreasing drug prices was immense, but there was greater opportunity in helping investors realize outsized returns by focusing on long positions distinguished by "strong management teams, ethical business practices, business models that are forward thinking—socially conscious."

All this sounds good but overlooks that Citron was one of the initial short sellers who had undervalued GameStop and were shorting the stock at 140 percent of the actually existing shares (the number is actually much higher since most of GameStop stock is privately held). It was thanks to Citron that what started as an attempt to realize fair value for GameStop eventually became a short squeeze that jumped the share price by hundreds of dollars. Citron was forced to eventually exit its short positions at a 100 percent loss.

Left did not say in the announcement whether Citron would stop shorting companies itself, or if it would just stop telling other investors to short companies. 

"If you choose to buy GameStop here, it's caveat emptor,” Left said in the video. “You know what we think about their business model, it's on you, too much has already been written."

Citron did not immediately respond to Motherboard’s request for comment about whether it would no longer engage in short selling.