Sahm Adrangi Seeks to Shine Light on Ad Fraud
Earlier in 2018, Sahm Adrangi presented at the Kase Learning Conference on Short Selling. The topic of his talk was ad fraud as it related to short-selling activism. For those not familiar with him, Adrangi is the Chief Investment Officer for Kerrisdale Capital Management of New York City.
Kerrisdale has been in business for nine years. They manage roughly $180 million. Kerrisdale published its first reports in 2010. That was an when short sellers managed to wipe out $10 to $20 million of capital that investors had plowed into fraudulent companies. Sahm Adrangi said that after that, Kerrisdale began to focus on US companies in market segments that are complex.
Sahm Adrangi said Kerrisdale publishes its research on its site, kerrisdalecap.com, as well as Twitter. They also post to widely-recognized sites like Bloomberg, CNBC, or Seeking Alpha. And he noted that Kerrisdale is only one of two companies to have done a live presentation focused on one of their short campaigns. That presentation was on Globalstar. Recently, he said, Kerrisdale has been focused on St. Joe, a Florida land developer located in the Panhandle. He also mentioned their report on Proteostasis. Proteostasis is a biotech company focused on cystic fibrosis and its drug candidate for that disease.
Much of his presentation focused on QuinStreet. QuinStreet is a company with two lines of business. One provides lead generation and the other matches ad buyers with advertising firms. Sahm Adrangi said that a behind the scenes site, Branch Insurance, was driving a not-insignificant portion of traffic to the ad firm’s site. Unfortunately, much of that traffic was not from people likely to buy the ad buyer’s product but by random folks on the internet who had been incentivized to engage with that site.
Kerrisdale seeks to shine some light on such operations, and in so doing, provoke a conversation that might lead to a reassessment of the Quinstreet’s actual value as opposed to its assumed value.
Sahm Adrangi feels the online ad market is particularly fertile ground for short activists because of the current opacity in that arena, and a shortage of disclosure on which traffic is coming from which business. He feels short activists have a role to play in shining a light on some of the iffy actors in the online advertising market.