What in the world of cocoa, coffee, cotton and cashews (among others) is Carson Block up to regarding Olam? One week after the short seller questioned the Singaporean commodity trader's accounting and debt burden, no explanation has materialized and the shares are off just 5 per cent. Was the timing of the allegations poor, or is this unusual shorting strategy yet to play out? Regardless of what comes next, leaving at least five trading days between the claims and any proof is too long.
Mr. Block's approach to Olam is a break from his norm. Previously, attacks through his Muddy Waters outfit have been launched alongside lengthy public reports which allege fraud. But last week's presentation is not public and there is as yet no report. And Mr. Block cannot have been unaware of his audience: the Ira Sohn conferences attract the biggest investors and media coverage. Olam represents not only a different approach by Mr. Block, but also a different type of target. Muddy Waters' website claims expertise in Chinese companies. Olam is a Singapore blue chip of which Temasek, the state investment agency, holds a sixth.
The shorts are certainly primed: Short positions in Olam are double their levels earlier this year and represent almost all the borrowable stock, according to Markit, or more than 13 per cent of the shares in total. That is twice as much as the city state's next most shorted stock. Perhaps Mr. Block has devised a form of market rope-a-dope – Olam has denied his claims, although it does not know the detail of them – and he is just warming up (although regulators might have something to say).
Shorts play a valuable role, all the more so when they make their issues public. Hit-and-runs like Mr. Block's attack so far don't serve any wider purpose – and this one does not seem to have served his followers well, either.