Amid the complicated financial jargon at play in short-seller Andrew Left’s ongoing securities fraud trial, the defense has repeatedly returned to a simple question: Can’t people disagree about stocks?
Citron Research founder Left, known for his bets on GameStop and frequent appearances on financial shows, has been accused of manipulating the market and deceiving retail investors through misleading statements. Prosecutors allege Left said one thing about over 20 stocks and then traded in the opposite direction, making over $20 million in the process.
Three days into the trial, it’s becoming clearer how the defense plans to handle the prosecution’s witnesses.
So far, prosecutors have focused on the stocks of two companies they say Left tweeted about and then traded on: the social media site formerly known as Twitter and Cronos Group, a cannabis company.
Prosecutors have highlighted the negative reports Left issued about those companies and called stock analysts who disagreed with his takes to testify. Meanwhile, the defense argued that disagreement over a stock does not necessarily constitute fraud.
Left issued a report in December 2018 titled “Twitter has become the Harvey Weinstein of social media” that cited an Amnesty International study documenting issues Twitter had regarding abusive content against women. He set a target stock price of $20, well below its then-trading price of around $30.
Douglas Anmuth, an internet analyst at JPMorgan, testified Wednesday that he covered Twitter at the time and disagreed with Left’s report. He said issues with hate speech on Twitter were well known, and the company had taken steps to address them.
The defense pressed Anmuth on whether disagreements among analysts necessarily meant something nefarious was going on.
“Fair to say when you and any other analyst disagree, that might just be a difference of opinion, correct?” Adam Fee, Left’s lawyer, asked.
Anmuth agreed, and a bit later, Fee raised the point again: “You would agree generally that reasonable people can disagree about how information in the market might impact stock prices?”
“People can disagree,” Anmuth said.
On a third occasion, Fee asked Anmuth, whose Twitter price target was $45 at the time of the Citron report, whether “reasonable people” could disagree about price targets.
A similar pattern played out during the earlier testimony on Wednesday of Martin Landry, an analyst who was covering Cronos Group in August 2018, when Left tweeted a negative report about the company. Landry testified that he wrote a rebuttal report at the time that said some of Left’s allegations about Cronos appeared to be “unfounded and biased.”
In cross-examination, Fee noted that Landry did not accuse Left of sharing false information, but that he disagreed with the importance Left placed on certain facts.
Fee also asked, “If you said ‘buy,’ another said ‘sell,’ the guy who said sell wasn’t committing fraud, correct?” Landry agreed.
Once more, he asked Landry if he agreed that “people can reasonably disagree about the value of a company.”
The line of questioning seemed to align with the central argument Left’s defense led with during opening statements on Tuesday: “He tells the public what he believes — the truth — and then he trades on the truth to make a profit. It’s not fraud. That’s trading.”
Left’s lawyers also leaned on his more than two decades of experience in the stock market. In their opening statement, they said he wouldn’t have lasted so long in the business and had so much influence if he’d been deceiving people.
“You would not have made it 20 years picking stocks if you were influenced by improper considerations?” Fee asked Landry.
“Exactly,” Landry said.
“Because people would’ve stopped listening, correct?” Fee asked.
“Yes,” Landry said.
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