Hedge investment manager Kyle Bass, whom operates Dallas-based Hayman Capital, tanked the stock of a little-known real-estate financier Friday by exposing that he's shorting the organization. Stocks of a genuine property investment trust (REIT) run by United developing Funding crashed above 30% after Bass unleashed his campaign, which accused UDF of orchestrating a $1 billion “Ponzi-like plan.”
People have explanation to trust Bass regarding real estate investments: The Texas hedge fund manager is renowned for making a lot of money in 2008 by betting against subprime mortgages ahead of the housing crisis. Just last year, Bass’s wagers proved prescient again as he shorted biotech stocks before drug pricing problems caused that sector to simply take a dive.
UDF finances the building of single-family home jobs through four community organizations available to investors—but one of those is actually exchanged on a stock exchange. That REIT, United Development Funding IV , was therefore the first to show the result of Bass’s statement, plummeting almost 31% after he unveiled his quick position on a website entitled UDF Exposed.
In a page on that website, Bass alleged that UDF utilized money from one of the four funds to “bail out” another which was struggling, “using new trader cash to pay for present investors” in “a Ponzi-like real estate scheme.” Bass expects your firm’s downfall is bankruptcy, phoning UDF “a billion dollar house of cards” that “is today in the brink of collapse.”
UDF happens to be under examination by the Securities and Exchange Commission since April 2014, the organization disclosed in December, responding to exactly what it labeled as “market hearsay” and “misleading private posts.” With its response, UDF stated that a hedge fund had built “a considerable brief position” of more than 4 million shares of the publicly traded REIT, and therefore it believed the investment had been “trying to unlawfully profit by manipulating and depressing the cost” regarding the shares—but it failed to identify the investment.
The hedge investment, we understand today, had been Bass’s Hayman Capital, which had published an unsigned study memo entitled “A Texas-Sized Scheme: Exposing The Darkest Corner of this REIT company” regarding the on the web investor discussion board Harvest Exchange. In outing himself because the UDF short-seller Friday, Bass launched a publicity blitz against his target, also taking right out Google keyword ads to promote his web site criticizing the business.
UDF CEO Hollis Greenlaw denied Bass’s accusations in a rebuttal uploaded regarding firm’s homepage, phoning Bass’s web site “false and misleading.” UDF, he said, helps to ensure that its financial reporting is precise and therefore it's in conformity with the law; the company is also cooperating using the SEC, that has not accused it of every wrongdoing. The REIT that Bass is shorting, Greenlaw proceeded, have not suffered any realized losses with its profile, as well as its loans tend to be “underwritten predicated on security worth.” Greenlaw also warned that he expected Hayman Capital to stay along with its promotion to benefit off the fall in UDF’s share price: “And we will safeguard our resources aggressively against these unfounded accusations, ” he said.