How many people went long after Muddy Waters report? I think I've figured out how this works. We all know that the Muddy Waters' reports look shady. It's full of innuendo, questionable "facts" that involve interviewing "specialists", "experts", "former employees", and "customers" that cannot be independently verified. Their report is suppose to look like a smear attack. The real purpose is to create volume. Short interest kept climbing after the attack. Shorts covered on the initial dip and re-shorted afterwards.
Someone, possibly with inside information, knew that this won't pan out. I didn't have a position in CCME until after the Muddy Waters report. It created a lot of news coverage, and I assessed the public pieces of information that I could find and the Muddy Waters report looked so bad that I sided with Starr, Deloitte, etc and brought CCME. It looked like I was betting against an obvious smear campaign and the catalyst to resolve it all was the 10K. Realistically, people like me created a bid so the big short hedge fund guys who knew something was rotten could pile into the short position and short 70-80% of the float without significantly driving the price down (if they drove it down $5, they won't be able to make much money on the short). Think about it, even though Muddy Waters reports are bad, their targets not not random. Some big money short fund is calling the shots.
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