A Sino-Forest operations in ChinaThe Globe and Mail
John Paulson might not be interested in Sino-Forest Corp. anymore, but the folks at Wellington Management Co. sure seem to have taken a shining to the Chinese forestry company.
According to Bloomberg News, the Boston-based investment firm boosted its stake in Sino-Forest from about 80,000 shares to more than 28 million shares, or 11.5 per cent of the company. The shares, of course, had been heavily discounted following the sharp decline in June, when short-selling firm Muddy Waters published allegations that the company had overstated its timber holdings.
Mr. Paulson, a famous hedge fund manager who had been Sino-Forest's biggest investor, took the wind out of remaining shareholders when it was announced in June that he had ditched all of this holdings in the company, in the process taking a sizable loss to both his prestige and assets. Hopes for a rebound appeared to wither with that news.
Investors certainly like the fact that another well-heeled investor has stepped in though, and appear to be happy following Wellington's lead. The shares surged more than 50 per cent in afternoon trading on Monday in Toronto. For Wellington, though, this is a relatively small bet: With $663-billion (U.S.) in assets under management, the investment manager can probably stomach the roughly $90-million exposure (as of Thursday's close) that it has taken in Sino-Forest. Then again, $90-million can't be described as "fun" money" either.
No one from Wellington was yet commenting on the stake, according to Bloomberg (it is July 4, after all). However, it does seem to fit in with the firm's investment style. From its web site: "Our analysts focus on uncovering differentiated, moneymaking ideas for our clients by taking varied analytical approaches or by being early to anticipate changes in companies, securities, sectors and investor opinions."
Carson Block of Muddy Waters recently said he was still short Sino-Forest, evidently maintaining the view that the shares were headed to zero. With a big institutional investor now taking the other side of that bet, though, he might have some more explaining to do.
(An earlier version of this posting incorrectly stated Wellington's assets under management totaled $663-million, instead of billion.)
David Berman