Citron's New Short Strategy: Chumming For Trump

Andrew Left is flinging a whole lot of red meat at the president.

We've written plenty on the career of the Trump-tweet algorithm, from its promising rise to its broader acceptance to its shameful end as an ad firm's puppy-saving gimmick. Though the strategy seems like a no-brainer (and it is), the big issue with whipping up code that trades on the president's tweets is how infrequent they are. To make the tactic worthwhile, you'd have to be able to somehow predict Trump's tweeting in advance. Or better yet, make him tweet.


Andrew Left seems attempting just that. On Tuesday the short-seller's Citron Research published a brief on Motorola Solutions, arguing that the company's profits rest on jacked-up contracts that cost the U.S. government about five times what European governments pay. Outrageous! “What would President Trump say if Lockheed was charging the US Air Force 5 Times what it Charged the United Kingdom for an F-35??” the report mused with Citron's characteristic subtlety.

The Motorola thesis is only the latest chunk of red meat Citron has tossed in Trump's direction. In December Citron called Express Scripts the “Philidor of the pharma industry,” recalling the scandal that brought down Left's favorite target, Valeant Pharmaceuticals. In January it was aerospace company TransDigm, aka “the Valeant of the Aerospace industry.” In both cases Citron blared that Trump might step in and regulate, as he promised to do with the F-35 and drug prices.

This is the short-seller's version of chumming, in which a fisher strews a trail of gore in order to draw big prey. Each of these shorts might have a perfectly valid reasoning behind it – and each short announcement did move the relevant stock – but the real catch is the Donald. From Citron's Motorola letter:

With the arrival of the Trump Administration, and its management style of introducing business-style negotiations into the Government’s contracting for goods and services, plus the maturing and emergence of open-platform FirstNet, it appears the no lobbying, high paid consultants, football tickets, golf outings, or Las Vegas conferences can overcome the forces driving competition and innovation.

Left learned a powerful lesson from his role in the Valeant affair: Publicity helps. Raise a stink rank enough to attract reporters, stir up the foulest political humors, and sit back as the media and regulators tag-team your target. With Trump's arrival, that strategy looks even more attractive – as long as you can get his attention.

The only thing Citron has yet to find out is that there's already a playbook for that, too.