- Hudson Bay Capital Management is a fund that has previously settled SEC charges for securities laws violations and has been linked to an ongoing investigation relating to an alleged pump and dump ring.
- Several of the companies Hudson Bay Capital Management has been involved with raise many red flags. Examples include: FCEL and SAVA.
- Since 2018 Hudson Bay Capital Management has held large stakes in 34 different companies. The vast majority have since experienced significant decreases in their share price, in some cases greater than 95%. The average annualised rate of return for these 34 companies is an underwhelming -18%. If shells and tickers with recent and unusual price runs are excluded the average annualised rate of return drops to a horrific -53%.
In the sport of hockey, the term “Hudson Bay rules” is used to describe a style of play where there are no penalties called. It is thus a euphemism for an aggressive style of play that disregards the rules of the game. It should perhaps come as no surprise that we have decided to feature Hudson Bay Capital Management in our third investor warning that takes a closer look at so-called “dubious” third parties. We must emphasise that this article is no way accusing Hudson Bay Capital Management of breaking any laws, regulations, duties or contractual obligations (excluding matters that have been settled with the SEC), we are simply highlighting how this fund finds itself repeatedly involved with publicly traded companies that exhibit highly unusual yet somewhat predictable share price behaviour.
Hudson Bay Capital’s website is very slick (1), as to be expected from a multi-billion dollar asset management firm. It states that “persistent profitability has been the focus that has defined our approach since inception” and that “our investing philosophy has deep, personal roots”. These personal roots pertain to its founder, managing partner, CEO and CIO, Sander R. Gerber. Mr. Gerber is a University of Pennsylvania graduate with over 25 years of experience in “multiple securities classes and derivatives across a broad range of strategies.” (2). Most of Hudson Bay Capital's investments are in mega/large/medium caps but as the data presented in this article shows it appears that Mr. Gerber also has a penchant for small/micro/nano caps.
A quick Google search will reveal that Hudson Bay Capital has previously “played” by “Hudson Bay rules”, as it appears to have had little regard for Rule 105 of Regulation M of the Exchange Act, a rule that “prohibits buying an equity security made available through a public offering, conducted on a firm commitment basis, from an underwriter or broker or dealer participating in the offering after having sold short the same security during the restricted period as defined therein”. In September 2013, the SEC initiated administrative proceedings against Hudson Bay, stating that “On four occasions, from May 2009 through December 2012, Hudson Bay bought offered shares from an underwriter or broker or dealer participating in a follow-on public offering after having sold short the same security during the restricted period”(3). Hudson Bay Capital Management settled the matter by agreeing to pay disgorgement of $665,674.96, prejudgment interest of $11,661.31, and a penalty of $272,118.00. (4).
To view the full contents of this report and/or our other Investor Warnings focusing on so-called "dubious" third parties, please select one of the options below. These reports include:To have an idea of what to expect please have a look at our free Investor Warning on Lincoln Park Capital.
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