Opinion

Felix Salmon

Blogonomics: moving markets

By Felix Salmon
September 15, 2010

What’s the best way to monetize a blog? I don’t know how much John Hempton has made off this blog entry, but it’s surely up there in the annals of the most lucrative posts of all time.

Hempton found an obscure Chinese travel company which somehow managed to get itself a listing on the NYSE: Universal Travel Group. He tried to book travel through Universal Travel’s website, and failed. And after 5,500 words of explaining exactly why he was doing it, he shorted Universal Travel’s stock. Which turned out to be a great trade: the stock plunged by 20% today, entirely because of Hempton’s blog post.

Universal Travel put out a press release at the close of trade today saying that it “categorically denies all the allegations contained in the blog”, but not getting into specifics; there’s vague but ominous language about “aggressively pursuing all legal remedies against Bronte Capital and John Hempton”, but I very much doubt they’ll come to much.

Historically, short-sellers have been shadowy types; they like to publicize their findings, but they tend to do so behind the scenes, giving journalists information and having very long conversations off the record.

Hempton’s different in that he’s happy, on occasion, to make his allegations in public, under his own name. He doesn’t always publicize his shorts, even when he suspects outright fraud, but his blog does have enough of a following now that he knows he’ll be widely read if and when he chooses to do so. After today’s big payday, I reckon he might try the tactic more often.

The story of Universal Travel is far from over: if Hempton’s right about the company, and I think that he is, then the SEC and the NYSE are both going to have to answer some very pointed questions about how and why they allowed the company to get this prestigious New York listing in the first place.

But I do love the way that the blogosphere is moving markets. Reading a blog entry from someone with real skin in the game is often a lot more fun than ploughing through “objective” journalism from someone who isn’t allowed to invest in or short what they’re writing about.

Comments
5 comments so far | RSS Comments RSS

Hempton’s article is useful, but some may be still be on the fence. Read the press release by UTG.
There was a time – maybe late 90′s? – were constant references to oneself as “the/a _leading_ [whatever]” were regarded as simply background noise – akin to, I need to take a piss, forgive me for a minute” – but today is > Y2000. At this point such “leader” language only offers the choice to the reader “I am a moron” or “I hope to scam morons”.
Read the release: are they stupid, are they trying to scam you, or is there a time warp?

Posted by bxg5 | Report as abusive
 

It’s a time warp. This is China we’re talking about.

Posted by Uncle_Billy | Report as abusive
 

felix – check Hempton’s post today, and the updated comments on his post from yesterday. Sadly, people are accusing him of destroying UTA stock and “hurting shareholders.” I read his entire piece, and I can’t find anything he did wrong – all he did was explain that what claims to be an online travel site is actually incapable of booking travel online.

Posted by KidDynamite | Report as abusive
 

Check out the latest blog on stocks http://www.sheposherow.com

Posted by reader961 | Report as abusive
 

Great tips about moving market. Thanks

http://www.otcmarketalerts.com/

Posted by GilBurt | Report as abusive
 

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