Famed short seller, Carson Block, has set his sights on a new target, green energy companies. He says the sector is “filled with lies and bullshit.” The Financial Times reports:
Few prospects can be more unpleasant for a corporate leader than attracting the sustained interest of Carson Block. The founder of short-selling hedge fund Muddy Waters shot to prominence more than a decade ago by loudly — and correctly — describing the Canadian-listed Chinese timber company Sino-Forest as a fraud. A string of high-profile short bets followed, against targets ranging from then FTSE 100 healthcare company NMC Health to the French retail giant Casino and Singapore-listed commodity group Olam.
Now Block has turned to green business, having concluded that the excitement around ESG strategies is leading investors to overlook glaring problems in this space, he told us. “It’s like, ‘Hey, you’re doing renewables! We can’t ask any questions of you.’”
Block, in contrast, has started asking quite pointed questions. This summer he published a report on Sunrun, the biggest US residential solar power provider, accusing it of being an “uneconomic business” that had exaggerated the value of its customer agreements while understating future costs.
Typically, a Muddy Waters attack prompts a dramatic fall in a company’s market value. Sunrun’s shares, on the other hand, jumped nearly 30 per cent on the day Block went public with his claims, and has held on to most of those gains. Block had the “misfortune”, he told us ruefully, to publish his report just after the rebel Democratic senator Joe Manchin agreed to support a historic bill promising more than $300bn in green investment — sending Sunrun’s shares to $30.92 from $23.79. Sunrun closed at $30.47 yesterday.
Block remains adamant that Sunrun’s investors are in for nasty surprises. He claims the company has used aggressive accounting methods to overstate the cost of its solar panel installations, inflating the value of the tax credits that it sells on as a core part of its business model. He also pours scorn on its suggestion that 90 per cent of customers will renew their deal with Sunrun at the end of their 20 or 25-year contract — rather than invoke their right to have the “obsolete” old panels removed at Sunrun’s (potentially huge) expense.
Misleading practices are widespread in the US residential solar sector, Block claims, blaming an obsession with rapid growth at the expense of standards. “It’s not to say that . . . on the entire planet, there are not renewables projects that are economic. But what they’re doing by and large is not economic,” he told us.
Read more here.