It is not very often that people think of investing in a company that they believe will lose money, but this is exactly what the Chief Investment Officer of Kerrisdale Capital Management Sahm Adrangi does. Sahm Adrangi engages in a type of investing known as short-selling, which is essentially a way of saying he bets against a company. Sahm Adrangi is very careful about what companies he chooses to arrange a short sale attack on an does extensive research before making the decision to go ahead with his plans. Unlike most short sellers who tend to do this anonymously or by a Trojan Horse like attack, Sahm Adrangi makes the findings of the research completed by Kerrisdale Capital Management well known. He publishes his findings online and gives press conferences about the matters frequently. He specializes in certain fields like biotech, mining, and telecommunications. This time, he has set his focus on an online marketing company called QuinStreet.
QuinStreet earns revenue by generating traffic to the websites of the companies that they are affiliated with. By generating traffic, the affiliate can make money from the potential customers. Unfortunately for their clients and investors that jumped onboard the company when their stock price rose, this traffic may all be extremely bogus. The research that Sahm Adrangi produced suggests that QuinStreet is engaging in fraudulent business practices by generating traffic from bots as opposed to actual people. This means that their customers are paying them for services that they actually are not receiving. It also means that their investors were led to believe that QuinStreet is doing much better financially than they actually are. One of the things that made Sahm Adrangi question the validity of the traffic is the fact that most of it went to only one company. Kerrisdale’s findings how that QuinStreet is not a quality organization and their business model is riddled with flaws on a fundamental level.