LONDON, Nov 20 (Reuters) - Short-sellers started to make large bets on a fall in the share price of Superb Summit International Group about two months before research firm Muddy Waters questioned the balance sheet of the Hong Kong-listed timber company on Wednesday.
Muddy Waters founder Carson Block, who rose to prominence in the investment industry after he challenged the accounting practices of a series of Chinese companies, claimed that loss-making Superb Summit had little or no forest ownership, sending its shares down on Thursday.
Short-sellers sell borrowed stocks, hoping to profit by buying back the shares at a cheaper price and pocketing the difference. About nine of every ten shares in Superb Summit that can be borrowed were out on loan on Tuesday, up from only one in every ten in late September, data from financial information company Markit showed.
Borrowing interest spiked mainly in the first and last week of October. Between Sep. 30 and Oct. 6, stocks on loan rose to almost 60 percent from 11 percent.
Superb Summit is also ranked fourth in the list of the most preferred short position in Hong Kong as measured by percentage of stocks on loan, the data showed. (Reporting by Nishant Kumar; Editing by David Goodman)