Reborn: Billionaire in College

Chen Pingjiang himself has no image burden, let alone on the outside Internet, so just criticize him.

What's more, for foreigners, if you don't react, they will really think you are easy to bully.

They must be beaten hard until it hurts.

Musk is the kind of person who has been arguing with short sellers on Twitter for years.

Carson Block: [This is a personal attack, haha. Are you worried because I asserted that Renren’s stock price will fall? @陈平江]

Chen Pingjiang immediately followed up with a message: [Stupid guy won’t cooperate with me. ]

The verbal battle between the two attracted countless people to watch.

What is surprising is that the number of people supporting Chen Pingjiang is far greater than that supporting Carson Block.

The main reason is that the identities and status of these two people are very different.

If Carson were a Chinese, he probably wouldn't even be worthy of carrying Chen Pingjiang's shoes.

Chen Pingjiang's task today is to promote his Twitter and Facebook accounts so that more people can see his confidence.

It is quite tacit that the bears did not make any more moves throughout the day.

This does not mean that they have surrendered, but just temporarily stopped their actions. They plan to wait until the power of the favorable market conditions of Renren has been almost consumed before taking further action.

As of the closing, Renren's stock price jumped 3.7% to US$167.06.

But later that day, a rumor began to circulate.

The SEC (U.S. Securities and Exchange Commission) is considering whether to send a letter to Renren to inquire whether the allegations of Renren's falsified gaming data in the Muddy Waters report are true.

No wind, no wave!
Chen Pingjiang immediately figured out that this matter was probably reliable.

Who would believe it if there are no people from major institutions in the SEC?
Let’s not talk about the transfer of benefits.

Everyone eats in the same circle, and when you get to the top, basically everyone knows each other.

It’s a piece of cake to send a letter to inquire.

Who doesn’t know these tricks used by foreigners?

The collapse of Sinopec Treasure, the Tsingshan Nickel incident, and the Berkshire incident on June 2024, 6 have long exposed their true colors.

On April 2020, 4, the price of the Chicago Mercantile Exchange WTI May futures contract closed at -21 US dollars per barrel, falling to a negative value for the first time in history. This was an extreme performance under the turbulent global crude oil market during the mask period, causing all long position holders of "Crude Oil Treasure" to be liquidated. Chinese stock investors suffered a huge loss of 5 billion.

In the Tsingshan Nickel incident, foreign short sellers failed in their encirclement and suppression, and had to pay compensation of tens of billions of RMB. As a result, the London Stock Exchange directly announced the cancellation of US$39 billion in transactions.

The Berkshire incident on June 2024, 6 was even more outrageous.

Many investors purchased Buffett's company shares at a reasonable price, with most transactions priced at $64 per share. As a result, the New York Stock Exchange (NYSE) directly announced a technical failure and notified that the transaction was invalid.

The scary thing is not canceling the transaction normally, but directly changing the money in your account in any way they want.

On this day, major financial newspapers and news media in the United States were also busy.

Basically, there are two camps. One camp believes that Renren is fraudulent and has a bubble, while the other camp believes that Renren is performing well.

Of course, the latter group was the navy that Chen Pingjiang bought with money.

You can't do it without hiring internet trolls. You don't have your own voice. Newspapers and programs across the United States are saying that Renren is going to fall. Chen Pingjiang can't bear it at all.

In this case, we should muddy the waters and distinguish the true from the false so that investors cannot see clearly and will not act rashly.

As it turns out, this trick is also extremely useful.

Here we have to say that when domestic companies are shorted, they will only prove their innocence.

No one ever thought of fighting back on Twitter or in the media.

People abroad are concerned about this, and people at home are also concerned about this. I won’t even mention those in the financial media. The key point is that there are also many investors in China who trade U.S. stocks, and everyone is waiting and watching.

One side says it will fall, the other side says it will rise.

The falling side produced various data, and the rising side was because Renren itself was firmly optimistic about its own stock.

The majority of shareholders don’t know what to do.

Those who are less courageous choose to lock in the profits and sell out a part of them first.

Those who are brave enough still plan to give it a try.

There was no major movement on November 11th and November 10th.

On the contrary, because Renren's repurchase plan officially came into effect, Renren's stock price once again broke through the $170 mark, reaching $171.42.

Although the situation seems to be thriving, Chen Pingjiang cannot feel relaxed.

All eyes are on November 11, which is Monday.

On Saturday, November 11, short-selling king Horwin posted a photo on Twitter of the box of torn shorts that Chen Pingjiang had sent out.

[I have received the shorts, but they seem to be of average quality. Thanks to my Chinese friend, I will have a gift for you on Monday.]

The words were full of provocation.

The tweet also foreshadows a big fight on Monday.

EST, November 11th, 14:9 a.m.

"Renren opened slightly lower!"

“Pre-market price is $170.68!”

"so excited!"

Domestic stock investors who are watching the show are all paying attention to this battle between bulls and bears.

In the first hour after the market opened, Renren's stock price fluctuated slightly, neither going up nor down.

At 10:10 a.m. Eastern Time (: p.m. China Time), Gao Jie, the board secretary, hurried over with a phone in his hand, his expression serious: "Mr. Chen, it's the SEC calling."

A cold light flashed in Chen Pingjiang's eyes for a moment, and he finally came.

…………

3 p.m. Eastern Time, 3 a.m. local time.

Renren.com announced that it has been asked by the U.S. Securities and Exchange Commission (SEC) to provide financial records since January 2011. Renren.com said it has hired consultants to investigate the allegations of market research firm Muddy Waters, but cannot predict the duration and outcome of the SEC investigation.

After the announcement was released, Renren’s stock price suddenly collapsed.

$168.43! $164.72!

$159.67!

……

As of the close of trading, Renren's U.S. stock price was $152.84, a sharp drop of 12%!

The upward trend that we worked hard for two or three days was brought back to its original state within an hour.

The SEC investigation is certainly a negative impact.

Basically, when an institution releases a short-selling report, the company being short-sold will be investigated. Both iQiyi and GSX have been targeted in this way.

Do you believe me if you say there is no connection between the two?

When iQiyi was under investigation, its stock price plummeted 19% during the trading session. It was even worse after that, with a cumulative drop of 26% in two trading days.

After the market closed, no one left, but instead reviewed today's trading.

Bu Housheng said: "Short sellers are taking advantage of the announcement of the SEC investigation to frantically increase their positions. Some institutions have also bought three-month put options on Renren.com. They need to come up with a solution tomorrow, otherwise the stock will fall sharply."

"We have many disadvantages in this wave. Director Chen, should we continue to absorb the funds?"

Chen Pingjiang nodded without hesitation: "Of course the plan remains unchanged. Don't stop until I tell you to."

Bu Housheng looked unhappy. "But if we use a lot of cash, we will be stuck at a high level and unable to escape. Now the major short-selling institutions are not only attacking us from the perspective of sensitivity and correlation, but many people are also using contrast strategy as an excuse. As the saying goes, 'the higher the expectations, the greater the disappointment.'"

"Renren.com is an indispensable tool for foreign hedge fund managers to 'short China.' These people, either because they are pessimistic about China or because they want to hedge their risk by investing in China, often choose stocks with good liquidity. Renren.com's 'securities lending' interest rate is relatively low, so it has naturally become the biggest reliance for overseas investors to short China."

In the words of Bu Housheng, shorting Renren's stock price has become a consensus, which is a combination of forces at multiple levels and dimensions.

At most, let the stock price fall. Anyway, it will rise again if the subsequent performance is good. There is no need to fight for it.

1. Chinese stocks listed in the US.

2. The stock price has risen too sharply in the past year.

3. The global environment is not good.

Chen Pingjiang knocked on the table and said, "It is precisely because we are the representative of Chinese concept stocks that we cannot fail, otherwise this person will unscrupulously short Chinese concept stocks in the future. If we back down this time, what will happen if this group of people waits for our stock price to rise again in three months or six months and then comes to reap the profits? Who will dare to buy our stocks in the long run?"

In short, Chen Pingjiang does not want Renren's stock price to become a leek.

Once they are ripe, they will be harvested!
Just when everyone was at a loss, Chen Pingjiang suddenly had an idea.

Then he looked up and asked Bu Housheng on the opposite screen: "Is naked short selling of US stocks allowed now?"

Bu Housheng shook his head: "No, it is not allowed. After the financial crisis in 08, the SEC has permanently banned naked short selling because they believe that naked short selling was one of the main factors that led to the bankruptcy of Lehman Brothers."

After a pause, Bu Housheng asked, "Mr. Chen, are you thinking of the century-long battle when Porsche acquired Volkswagen?"

What happened when Porsche acquired Volkswagen?
In short, in the process of acquiring Volkswagen, Porsche acquired 74.1% of Volkswagen's equity through various means such as purchasing shares and buying options.

At this time, the short sellers entered the market and through short selling and naked short selling, the short selling ratio reached 10.4%.

Now the problem arises. Porsche holds 74.1% of Volkswagen's shares, and the German government holds 20.1% of Volkswagen's shares, for a total of 94.2%.

This means that only 5.8% of the shares are left, while the proportion of institutional short selling has reached 10.4%. Even if short-selling institutions buy all 5.8% of the shares on the market, there is still a hole of 4.6% that cannot be filled. These 4.6% of shares are created out of thin air by their naked short selling.

No one wants to be one of the remaining 4.6%, which will lead to jail time.

As soon as the stock market opened, short-selling institutions began to frantically buy Volkswagen shares. Under the frenzy, the stock price soared like a monkey through the sky. In just two days, Volkswagen's stock price rose from 200 euros to 1005 euros, a direct five-fold increase, which inexplicably made Volkswagen the company with the highest market value in the world.

However, this also seriously disrupted the normal trading of the market. The exchange could no longer sit still and brought Porsche and these short-selling institutions together for negotiations, hoping that Porsche would take out 5% of its shares so that these short-selling institutions could close their positions.

Porsche doesn't need to go to extremes. It can sell 5% of its shares, but it must be sold at the hyped price of 1005 euros per share. Everyone knows that Volkswagen is not worth this price at all. Porsche is taking the opportunity to make a lot of money from institutions. After this matter is over, the stock price will inevitably return to normal, and then it can be bought back at a lower price. Short-selling institutions can only be forced to accept the price of 1005 euros. This is the short squeeze that the air force fears the most.

The fifth richest man in Germany at the time eventually chose to commit suicide by lying on the railway tracks because of this incident, which also marked Porsche's great victory over these capital air forces.

Chen Pingjiang shook his head: "Yes and no, it's almost the same idea. If we want to win this round, we can only focus on naked short selling. There should still be a way to achieve the same effect of short squeeze in the US stock market, right?"

The reason Chen Pingjiang asked this was because he was thinking about the GameStop incident.

——GME (GameStop) bulls and bears battle.

The short sellers were severely beaten and finally forced to unplug their network cables.

The stock rose from $4 to a high of $483, and the short sellers were forced to use all possible means.

Key figures were threatened, forums for stockholders to communicate were closed, and many brokerages were officially banned from buying GME and could only sell it. If this is not considered naked hooliganism, then what is?

At that time, many people in China made a lot of money.

Bu Housheng on the other side of the screen obviously didn't understand what Chen Pingjiang was talking about. "Mr. Chen, without naked short selling, there would be no extra stocks out of thin air, and short sellers wouldn't be squeezed out."

As mentioned earlier, normal short selling requires institutions to intervene and sell stocks at high prices, then short the stocks and buy them at low prices and return them to the brokerage to generate profits. This is normal short selling.

Naked short selling means that you do not borrow stocks yourself, but can sell the stocks you do not have on the market on the same day. You only need to buy the stocks in the stock market three days later for delivery.

As time goes by, there are more stocks.

This is how the German tycoon was forced to lie on the railway tracks.

When naked short selling is prohibited, there is no way to operate it.

The group of people frowned and thought hard for a while, and suddenly they saw Chen Pingjiang jumped up excitedly, rubbing his hands and dancing.

"I thought of it!"

“Market makers, market makers are the key!”

Looking at the confused faces around him, Chen Pingjiang continued to explain: "We buy call options through market makers. Lao Bu, if you were a market maker, what would you do?"

Bu Housheng thought for a moment and said, "If I were a market maker, I would definitely not want to take risks. I earn my commissions and must buy a corresponding number of stocks in the stock market to hedge the risks. This way, no matter whether the stock price rises or falls in the future, the market maker will not lose money."

Chen Pingjiang snapped his fingers excitedly: "Correct. In short, for every call option contract sold, the market maker will hedge the risk by purchasing a certain amount of stocks. More importantly, the price of the option contract is much lower than the exercise price. Assuming the exercise price is $20, the option contract price may only be $1-2, which means that options can leverage 10 or 20 times. Only a small amount of funds is needed to buy a large number of call options, but we can force market makers to actively buy Renren stocks in order to hedge the risk."

Bu Housheng's eyes lit up, and he looked at Chen Pingjiang with a genius look, and his tone became excited: "In that case, there will be very few circulating shares on the market, so the following situation will be formed. On the one hand, brokerages will have to buy stocks to hedge the risks of call options, and on the other hand, Wall Street institutions will also have to buy stocks when shorting transactions are settled. This will cause the circulating shares to be in serious shortage, and the stock price will soar, eventually causing the Wall Street short-selling institutions to be liquidated and leave the market."

"Besides, we don't have many shares in circulation on the market, so we have the basic conditions for operation. The only problem now is where can we find so many third parties with no relevant interests to buy Renren's call options!"

Chen Pingjiang raised his eyebrows: "Is this a difficult task? Just pick a reliable foreigner to do it, and clean up your mess so as not to be caught by the short sellers and the SEC."

……

The knowledge is a bit dense. If you are interested, you can take a look at the Porsche acquisition of Volkswagen and the long-short battle of GameStop. (End of this chapter)