Kerrisdale Capital Management issued a report about QuinStreet, Inc. recently that was quite negative. QuinStreet is an online marketing firm headquartered in Foster City, CA. It was founded in 1999 and has something of a sketchy past including having to pay a fine of $2.5 million when it was discovered they were illegally using advertising targeted at veterans in order to get them to become students at a number of for-profit universities.
While investigating QuinStreet’s current advertising tactics Sahm Adrangi, the founder and CIO of Kerrisdale Capital, and his team of analysts saw that QuinStreet is once again engaging in suspicious activities. Sahm Adrangi says that QuinStreet is sending a lot of phony traffic to websites under their control. This creates a stream of income for QuinStreet at the expense of the clients they have signed up. The report also states that just about all of the revenue growth at this company has come from just one of their clients which isn’t a sustainable business model. He called QuinStreet a firm whose business model is completely broken.
Before issuing the report on QuinStreet, Kerrisdale Capital had taken a short position on it. This means if QuinStreet’s stock value plunges Kerrisdale will make investment gains. Sahm Adrangi indicated in his report that he would be holding a telephone conference later that day where he and his team would divulge the information they have documented about QuinStreet.
Sahm Adrangi was just 24 years old when he founded Kerrisdale Capital in 2009. Prior to that he had worked for three firms in the financial industry which were Chanin Capital Partners, Longacre Fund Management, and Deutsche Bank. He had been an analyst for each of these firms and developed knowledge about leveraged financing, restructuring investments, distressed and bankrupt businesses, and other areas of finance.
The hedge fund Sahm Adrangi manages is primarily invested in value stocks that he holds for a long time. However, when Sahm Adrangi sees a special situation such as QuinStreet he is willing to short a company’s stock. This type of investing is starting to become known as soft activism investing.
We short (misguided) innovation for a living, but shorting bitcoin or doubting cryptocurrencies is nutty. The mkt opportunity is massive https://t.co/Q4vsI9nuyf
— Sahm Adrangi (@SahmAdrangi) September 25, 2017