Edwin Dorsey, Whitney Tilson Defend Andrew Left: 'Positive Force For Markets And The Pioneer Of The Activist Short Movement'

Short seller Andrew Left is best known for being one of the prominent voices against video game retailer GameStop Corporation GME during its short squeeze in 2021. The short seller now faces charges from the SEC in a case that could forever change how short reports are published.

What Happened: Left turned himself in on Monday for federal securities fraud charges he faces and pleaded not guilty during his appearance in a Los Angeles federal court.

The not guilty plea could set up a high-profile battle between government agencies and short sellers, which has several prominent investors who have published short reports coming to the defense of Left.

Charges against Left claim he manipulated the stock prices of at least 15 companies in a five-year period, making around $16 million in illegal profits. Left could face up to 20 years in prison for each fraud charge, according to reports.

Edwin Dorsey Speaks Out: Bear Cave Research author Edwin Dorsey publishes short reports monthly, but unlike Left, Dorsey discloses that he doesn't actively take positions in any of the stocks in the reports. Dorsey wrote a new post titled "in defense of Andrew Left."

"I know Andrew Left, I like Andrew Left, and I consider Andrew Left to be a positive force for markets and the pioneer of the activist short movement," Dorsey writes.

Dorsey said without Left making short reports, the stock market could have more fraud and "fewer skeptics willing to go public."

In the write-up by Dorsey, Left's activity is defended and compared to other short sellers who did similar or worse when it came to shorting stocks, making public calls against stocks, and ultimately profiting from betting on stocks going down.

"If truthful, what's wrong with identifying a fraud as a fraud? Or calling a scam a scam? Why can't you declare ‘investors have been warned' after you warn them about a risk?" Dorsey added.

Dorsey said nearly the entire activist short industry "relies on trading around reports" that they write.

"Do investors really get hurt hearing Andrew Left give his opinion on investing in Tesla and Nvidia and shorting Cronos and Namaste?"

Dorsey questions when short sellers will be allowed to sell their position after writing a short report, given the new charges against Left.

"In sum, the indictment against Andrew Left muddies the waters in an already vague regulatory landscape, discourages short-sellers and skeptics from sharing detailed analysis of frauds, and limits their ability to profit on their own work."

Whitney Tilson Chimes In: Ex-hedge fund manager Whitney Tilson also wrote on why he's "not rushing to judgment on Andrew Left."

Tilson said he has known Left for 20 years and has talked to the short seller by phone and e-mail, sometimes sharing short ideas as both of them were activist short sellers.

Now a "value investor" according to his X profile, Tilson no longer shorts stocks. Tilson previously ran hedge funds from 2008 to 2017 and often shorted stocks.

"Andrew is incredibly smart, has great instincts, and, like many activist short sellers, is a bit of a wild man – he trades like a maniac and is very excitable. But I've never had any reason to question his integrity," Tilson writes.

Tilson said he doesn't know all the facts of the case, but has skepticism over the charges and the fact that Left's defense hasn't been presented yet.

The ex-hedge fund manager also writes that Left likely could have settled with the SEC and paid back millions in "ill-gotten profits," but instead is fighting the charges.

"Is it illegal for Andrew to trade around his own research and/or public statements? Not based on my understanding – unless there was evidence that he didn't believe what he was saying…"

Tilson revealed that part of the investigation against Left involves a 2018 tweet in which Left spoke favorably about Nvidia Corporation NVDA when shares were trading at a split-adjusted $3.59. According to the investigation, Left took profits within hours of making the post.

"My first comment is that anyone who bought NVDA at $143.63 (or $3.59 adjusted for subsequent stock splits totaling 40:1) and held to today has made more than 31 times their money. Those that followed the public advice and held on no doubt want to erect a statue in his name!"

Tilson also questioned why regulators are charging Left for exposing companies that were fraudulent and went to zero, while not filing cases against the CEOs of those "fraudulent companies."

"Ultimately, I believe in freedom of speech and freedom of trading. I think market participants should be free to speak and write about stocks they like or dislike."

Read Next: