In the world of business, it is well known that some companies are more honest than others. This is why value investors like Sahm Adrangi seek out and research these companies who are less than forthcoming with their business practices. When Sam Adrangi suspects that a business isn’t being honest with their investors or customers, he is not afraid to tell the world. When Sahm Adrangi discovers one of these companies, he and his company Kerrisdale Capital Management LLC not only do research, they sometimes short the stocks of the company that is in question. Shorting stocks involves a process that many investors deem to be too risky, but Sahm Adrangi has become an expert at it in his career. To short a stock, an investor borrows a certain amount of shares of a company that they see as very likely to drop drastically in price. As soon as they complete the purchase, the investor sells their stocks and waits for the price to become lower. At this point, the investor buys the same number of stocks that they bought initially and then return them to the lender. This makes it so that short-selling investors like Sahm Adrangi get to keep the difference in price, sometimes a considerable amount of money.
Sahm Adrangi has been doing this for years and has become quite good at it. His most recent target for shorting is the QuinStreet Inc. company. This company operates by driving traffic to the websites of their clients through online marketing. QuinStreet has been facing financial problems for several years, this is why Kerrisdale Capital was so surprised to see their stock quadruple in a very short period of time. After looking into it, Kerrisdale and Sahm Adrangi decided to start researching it more in depth and found that the rise was due to an increase in traffic that they had been directing to their affiliates. The traffic, unfortunately, appears to be completely bogus according to the research. Nearly all of the new revenue generated by QuinStreet came from only one client and is believed to be computer generated instead of genuine.