Problems at The Wall Street Journal
I love the Wall Street Journal. I read the Wall Street Journal religiously. And, until learning about the information in this article, I considered the Wall Street Journal to be the standard-bearer for ethical and honest reporting.
Join me as we explore some of the Wall Street Journal’s reporting as well as trading that appears to be done in advance of market-moving Wall Street Journal stories.
One example of trading around market-moving Wall Street Journal stories can be found in slides 122-128 of a May 2021 slideshow prepared by Callidus, a publicly traded Canadian lending firm. Callidus had sued Nate Anderson, the Wall Street Journal, and others alleging they conspired to fabricate and disseminate false whistleblowing claims.
The lawsuit includes text messages between Wall Street Journal reporter Rob Copeland, in blue, and Mr. Anderson, in white. At 6:47pm on July 27 2017, Rob Copeland told Mr. Anderson that the Wall Street Journal’s story on Callidus “should be out next Tuesday.”
According to court records, the following day, July 28 2017, Mr. Anderson began adding to his short position in Callidus stock.
Ultimately the critical Wall Street Journal story was published online at 3:32pm ET on Wednesday, August 9 2017. You can access an archived version of the article here.
According to the updated article: “Callidus shares dropped 19% Wednesday afternoon to C$12.06 after the Journal reported on the whistleblower inquiries. The stock fell 21% on the day overall and is down 35% this year.”
According to court records, on the morning of August 9 2017, hours before the Wall Street Journal article’s publication, Mr. Anderson increased his Callidus short by about 6,100 shares and later reduced his short by roughly 9,100 shares, at a meaningful profit, about 20 minutes after the story was published.
Mr. Anderson’s intraday trading shorting Callidus in the hours before the Wall Street Journal article and covering minutes afterward generated a ~$20,000 profit. This was around a time in Mr. Anderson’s life when he described himself as near broke.
In text messages from the litigation, Rob Copeland texted Mr. Anderson 13 minutes before publication “I have never had to lift harder to get a story out” and one minute after publication “It’s out.”
Rob Copeland also mentioned that he described Mr. Anderson to Wall Street Journal editors as “pure as snow” in order to get the story approved for publication.
Mr. Copeland did not include in his article that Mr. Anderson, one of the Callidus whistleblowers, was adding to his short position in Callidus stock hours before the Wall Street Journal’s story and reducing his position at a meaningful profit 20 minutes after the Wall Street Journal’s story.
Both Mr. Anderson and Rob Copeland denied wrongdoing and the Callidus litigation was ultimately dismissed. In December 2022, Mr. Copeland left the Wall Street Journal for the New York Times. Under his Wall Street Journal experience on LinkedIn, Mr. Copeland writes,
“My work has been called ‘totally false’ by Elon Musk, ‘fake and distorted’ by Ray Dalio, and ‘uncharacteristically freewheeling’ by Vice.”
As a newsletter author who occasionally publishes market-moving stories, it is inconceivable to me to text someone the timing of when I plan to publish a potentially market-moving article.
And if I saw evidence that someone improperly traded around The Bear Cave’s articles, I would distance myself from that person and rely on a lawyer’s advice about any reporting obligations.
It seems the Wall Street Journal has done the exact opposite, leading to newer concerns.
On August 27 2024, Hindenburg Research published on Super Micro (NASDAQ: SMCI — $26.6 billion) and highlighted “evidence of accounting manipulation” among other concerns.
At 10:47am ET on September 26, the Wall Street Journal published an article titled, “Justice Department Probes Server Maker Super Micro Computer.” The article was considered a Wall Street Journal Exclusive.
The Wall Street Journal story referenced the Hindenburg report four times, disclosed the probe “is at an early stage,” cited “people familiar with the matter,” and sent Super Micro stock down ~15% after publication.
Unusual Whales, a watchdog service that flags sizable option trades, highlighted options activity in the minutes before the Wall Street Journal Exclusive was published. The Unusual Whales tweet about Super Micro options activity reads, in part,
“Literally minutes before the news, we saw a spike of put buying and call selling at the $500 calls with buying opening up at the $400 puts expiring TOMORROW. Those puts got 3000% in twenty minutes. You can see the opening position in the first image, blue spike.”
Below is the same tweet with expanded text, reading in part,
“This spike caused the $400 put to become the second most popular options chain today, out of nowhere, especially given it being 10% [Out of The Money] with only one day to expire. Pretty insane to open such a big position and profit so instantaneously.”
Unusual Whales added,
“The position was so big it triggered numerous flow alerts on Unusual Whales.”
Unusual Whales estimated that the initial outlay on Super Micro options minutes prior to the Wall Street Journal story was about $100,000 and likely made over $3 million. It is unclear who made the trades and whether they were improper.
One of the co-authors of the Wall Street Journal’s market-moving Super Micro article is Ben Foldy. Mr. Foldy has written over a dozen Wall Street Journal stories involving Hindenburg, mentioning Hindenburg a total of over 100 times. In addition, in 2022 Mr. Foldy hosted the Wall Street Journal’s “Bad Bets” podcast and produced a six-episode series about Nikola and the Hindenburg short report.
In the last four weeks, Mr. Foldy has published just two articles: first, the Super Micro DOJ probe article following Hindenburg’s report and, second, an article about Hindenburg’s Roblox report.
I also believe Mr. Foldy is actively pursuing, or has already obtained, a book deal to write about Hindenburg and its Nikola short report. This was not disclosed in any of Mr. Foldy’s articles about Hindenburg.
Other parts of the Wall Street Journal’s coverage may be problematic as well. For example, a September 2020 Wall Street Journal article, not by Mr. Foldy, titled, “How Nikola Stock Got Torched by a Short Seller,” reads in part,
“As recently as June, Mr. Anderson knew little about Nikola. But two well-connected individuals—a former Nikola business partner and another person close to the company—began sharing texts, emails and a former employee’s communications related to Mr. Milton and the company, raising questions about Nikola’s operations, Mr. Anderson says.”
This Wall Street Journal article and every other Wall Street Journal article reviewed by The Bear Cave omits a relevant fact: Mike Shrout, the former dHybrid (later rebranded Nikola) employee, and Paul Lackey, the former Nikola contractor who figured out Nikola rolled its truck down a hill, were each compensated $600,000 by Hindenburg. This was mentioned in court filings and Season 2, Episode 5 (Minute 26) of the Bad Bets podcast, although this compensation arrangement doesn’t appear to be disclosed in Hindenburg’s original report.
Last week, on Tuesday October 15, I published an article titled, “Problems at Hindenburg Research.” Later that day, Mr. Anderson responded with a Twitter post titled: “Problems With Ed Dorsey.”
Three days later, Nate Anderson sent me a lengthy email and said he “reached out to multiple journalists” in an effort to discredit “Problems at Hindenburg Research.” He asked me to retract my article and added, in part,
“The reason I am writing this is because I figured I would just pause for a second before proceeding. I have no deep desire to publicly embarrass you or counterattack you further.”
If you believe this work is important, please consider supporting The Bear Cave. It is the only way we can speak truth to power.
This article is not investment advice and represents the opinions of its author, Edwin Dorsey. You can reach the author by email at edwin@585research.com or on Twitter @StockJabber. The Bear Cave doesn’t bet against the companies it writes about and instead makes money solely from reader subscriptions.
Good article. The level of corruption in the mainstream media and MSM connected traders in financial markets is highly disturbing.
Keep jabbing away Edwin. 👏🏼🙏🏼