The short seller who took down Sino-Forest isn’t rallying behind his peers who have set their targets on Canada’s real estate market.
“Obviously there are a lot of people who are short sellers who think that there is a bubble in Canadian housing," said Muddy Waters Research Founder Carson Block in an interview with BNN. "Some of the business development companies and banks are occasionally mentioned to me; nothing that we found to be something that is really interesting to us."
Block pointed out Muddy Waters doesn't do fundamental shorts; instead, the research firm is on the lookout for corporate "wrongdoing or misleading."
He acknowledged Home Capital Group was brought to his attention; but he's not prepared to join the short attack against the alternative mortgage lender.
"I've talked with people who are short it once they've been very public about it. Obviously, a short seller who lives in the Bay Area named Marc Cohodes has been very vocal over the years on it. But it's not something that we ever got interested in."
Block rose to fame in Canada in mid-2011 with his fraud allegations against Sino-Forest. His short thesis sent the forestry company's stock into a spiral, and eventually led the company to file for protection from creditors.
He told BNN "things in Canada pop up" periodically, but he doesn't currently have any short targets in this country. However, he argued there's a structural failing in Canada that leaves it vulnerable.
"With Canada, one of the things that could be contributing to short sellers' increased interest, if that is in fact the case, is the provincial regulatory system. ... I think the Ontario Securities Commission did a fantastic job with Sino-Forest. But I do think it's challenging for provincial regulators. It's more challenging when you have several different regulators, as opposed to one single well-funded regulator that looks after the entire market."
"I think that's something that is conducive to more bad behaviour on the part of public companies," he added.