After three days, the rollercoaster ride was over. It began on Tuesday, when Gotham City Research, a shadowy, U.S-based investor, attacked Aurelius Equity with a devastating analysis that questioned the company’s accounting and argued that “Aurelius’ shares are worth no more than €8.56 per share.” It was a particularly harsh assessment, especially considering Aurelius stock price was about 88 percent higher at the time.
In two days, shares of Aurelius lost half their value, erasing €1 billion ($1.07 billion) in market capitalization. Aurelius rejected Gotham City’s analysis and argued that the hedge fund intentionally presented known facts in a misleading way, drawing false conclusions. The pushback didn’t seem to help. Even investment companies that think long-term got rid of their shares in Aurelius.
Gotham City and other short-selling firms like it speculate on falling share prices. Trading borrowed shares, they profit when the price of those shares drop. Parallel to the release of its negative analysis, Gotham City bet that Aurelius shares would plunge, making millions in the process.
Increasingly, short sellers are targeting German companies. The country’s financial regulator is monitoring the situation.