Carson Block, left with no other choice, thought of one last resort: he booked a flight for that evening. He was going to China!
To plead with Chen Pingjiang!
Carson thought it over and over. Currently, only Chen Pingjiang held enough shares. If he released some at a reasonable price, Carson wouldn't have to jump off the rooftop.
Having been in China for so many years, he understood some Chinese. Carson booked a flight to Shanghai that evening.
More than ten hours had passed by the time he arrived in Dongjiang.
"Hey, beautiful, I'd like to ask, is CEO Chen Pingjiang in the company?"
The dust-covered Carson no longer had his usual composure.
The Renren.com receptionist glanced at him curiously, a hint of displeasure in her eyes. It was almost closing time, and yet a foreigner had shown up.
"May I have your name, please? Do you have an appointment?"
"Uh, my name is Carson. I'm the founder of Muddy Waters. Just tell CEO Chen my name and he'll know."
The receptionist called Guan Yifeng. Shortly after, she hung up and replied to Carson:
"Chairman Chen is currently receiving a VIP guest. You'll have to wait."
Carson's ears were sharp; he seemed to have heard a familiar name on the phone and quickly asked:
"I just heard Horwen, that's the name, right?"
"Yes, you heard correctly."
Carson's old face immediately darkened.
That damned Horwen, the troublemaker! It was he who urged the short-sellers to hold firm, which is why Carson lost so much money.
He couldn't find him yesterday, and now he unexpectedly ran to China too.
......
In the reception room were Chen Pingjiang, Horwen, and the head of Goldman Sachs China.
Horwen didn't know Chen Pingjiang and was afraid Chen Pingjiang wouldn't see him, so he sought out Goldman Sachs.
Chen Pingjiang had a good relationship with Goldman Sachs; after all, Goldman Sachs itself was an underwriter when Renren.com went public.
Through this back and forth, Horwen finally met Chen Pingjiang.
It must be said that Horwen was also unlucky and deluded.
He was the one who fled early, firing the starting gun for the premature rush, which led to the subsequent short-squeeze among short-sellers.
This guy lost but still felt unconvinced, so he turned around and got more money to continue shorting.
And now he couldn't get out...
"CEO Chen, can you give us a break and release some shares?"
Chen Pingjiang smiled and shook his head:
"Mr. Horwen, you must accept the outcome of your gamble. If I recall correctly, you were quite vocal on Twitter."
Hearing Chen Pingjiang's sarcasm, Horwengave two awkward laughs:
"Apologies, apologies. I was truly deluded, listening to that Carson fellow's nonsense. I deeply regret it now. Renren.com is a company with huge potential. Its stock price is not only not overvalued, but perhaps even undervalued."
"Name your price."
"Huh?"
Horwen was a bit taken aback by Chen Pingjiang's directness.
"I mean, Mr. Horwen, name your price. How many shares do you want at what price, and I'll let you off the hook."
Horwen hesitated for a long time, then held up two fingers and said somewhat sheepishly:
"Two hundred dollars?"
Unexpectedly, upon hearing this, Chen Pingjiang immediately stood up and called out to Guan Yifeng:
"See him out."
Cai Jinyong, the head of Goldman Sachs China Investment Banking, shot Horwen a somewhat displeased glance, implying:
"Do you really have the nerve to suggest that price?"
"Hold on, hold on!"
Seeing Chen Pingjiang about to leave, Horwen quickly shouted for him to stay.
He was determined to make Chen Pingjiang stay, no matter how shameless he had to be.
Chen Pingjiang shook his head bluntly:
"Mr. Horwen, your price lacks sincerity. I feel it's necessary to remind you that Renren.com's current stock price is $423.54. Your offer is less than half of that, and then discounted."
Horwen forced a smile:
"Chen, actually, we all know that your privatization announcement was just a scare tactic, right?"
The implication was that once the news of Renren.com's privatization fell apart, its stock price would still drop back down, so Horwen thought $200 was a good price.
Chen Pingjiang sneered:
"Are you kidding? Who told you the privatization news was fake? Even if it were fake, which it's not, wouldn't that be exactly what you wanted? You could just wait for the price to drop and then buy. Why come to me?"
Horwen gave a dry laugh, unsure how to retort.
It's nonsense, isn't it...
The stock price would take at least a few more days to fall, but he couldn't hold on for even a single day.
Seeing the stalemate, Chen Pingjiang finally cleared his throat and said:
"$430 per share. If you want it, I'll let you go; otherwise, forget it. Mr. Horwen, don't say I didn't warn you, you only have this one chance. My secretary just informed me that Carson has also arrived, and I need to rush to see him."
"Carson is here too?"
Horwen was stunned for a moment.
He didn't really want to see Carson, so he just nodded:
"$430 it is."
He had no choice.
Horwen had virtually no options and could only accept Chen Pingjiang's asking price, whatever it was.
Want to haggle? Then it's not for sale!
After seeing Horwen off, Chen Pingjiang met Carson with great interest.
This guy was the real instigator behind shorting Renren.com's stock.
"Carson, I know why you're here. Frankly, I don't want to send you to the rooftop either. $500 per share."
Carson opened his mouth and, after a long pause, finally spoke:
"Alright, Mr. Chen. Given my mistake in publishing the short-selling report on Renren.com, I agree to your price."
Chen Pingjiang wagged a finger:
"You've got it wrong. This price isn't to punish you for shorting Renren.com, but because your report was untrue and fabricated."
Carson looked up at Chen Pingjiang, somewhat puzzled,
"Is there a difference between the two?"
"Of course there's a difference. US stocks have their rules, and short-selling institutions have their own rules of survival. Shorting itself isn't the problem, but slandering, spreading rumors, and defaming simply to short—that's a problem."
Carson felt he couldn't quite see through this young man in front of him for a moment.
He actually endorsed short-selling!?
Chen Pingjiang continued with a smile:
"Are you surprised?"
"Yes, Mr. Chen."
"There's nothing to be surprised about. Short-selling institutions should act as watchdogs, overseeing listed companies that commit financial fraud and forcing them to delist, rather than focusing their energy on unnecessary things. Don't you agree?"
......
Carson left; he came quickly and left just as quickly.
He spent a total of no more than twenty minutes in Chen Pingjiang's office.
The reason Chen Pingjiang was willing to let these short-sellers go was not out of benevolence, but because he knew when to cut his losses and take profits.
The Renren.com shares previously absorbed by Tianyuan Capital had to be released, and it was perfectly fitting to let Carson and Horwen take over at a high price.
Moreover, the privatization farce wouldn't last much longer before being exposed. It was clear that Renren.com's stock price would inevitably return to rationality then. So, making a bit more profit now by getting out was beneficial.
All things considered, Chen Pingjiang's profit from this wave would easily be over a billion US dollars.
More critically, the abnormal fluctuations in Renren.com's stock had already attracted the attention of the SEC, and their intervention was only a matter of time.
At 11 AM EST on Wednesday, Renren.com's stock price had risen to a terrifying $498.71.
Just as Horwen and Carson were sleeping on their return flight.
Renren.com's official website uploaded an open letter.
"Earlier this week, Mr. Chen Pingjiang, the company's founder, stated on Twitter that he intended to privatize Renren.com Group. We are now announcing the latest news: Renren.com Group will abandon the goal of privatization."
"Reason one: Shareholder opposition. Most of Renren.com's existing shareholders believe it is best for Renren.com to remain a public company. Additionally, many institutional investors explained that their internal regulations would restrict their investments in private companies."
"Reason two: Limited retail investment. If Renren.com were truly privatized, there is currently no confirmed path for retail investors to hold shares."
"Reason three: Time-consuming, labor-intensive, and unsustainable. The time and diverted energy required for privatization clearly exceeded initial expectations, and Renren.com's current priority should be to focus on the development of its WeChat program and strive for financial sustainability."
As soon as this open letter was released, Renren.com's stock price immediately crashed.
Major institutional media outlets were in an uproar.
Countless short-sellers loudly cursed Chen Pingjiang as a fraud through the media!
Only the retail investors, who had long since fled, had already reaped two or three times their profits. Why would they stay and wait for the New Year?
By careful calculation, only the short-sellers were most hurt.
Although some of them knew Chen Pingjiang was just bluffing, they couldn't afford to bear the consequences.
Who knew that Chen Pingjiang would overturn his previous statements in less than two days?
Just two days!
And their prior estimate was at least half a month!
But the short-sellers also knew that even if it was just two days, they couldn't hold out, and fleeing was imperative.
That day, Renren.com's stock price plunged by 27%, closing at $392.68.
The short-sellers were furious and reported it to the SEC again.
The next day, investigators from the U.S. Securities and Exchange Commission (SEC) launched an investigation.
The SEC believed that the source of Chen Pingjiang's funds for the privatization transaction was unclear, and that he had used the opportunity to inflate Renren.com's stock price, requiring a thorough investigation.
Subsequently, short-sellers filed a class-action lawsuit, accusing Chen Pingjiang of alleged securities fraud and "almost completely ruining" them.
In response, Chen Pingjiang spread his hands, essentially saying: sue if you want, or be willing to sit down and talk about a settlement.
At most, he'd pay them tens of millions of dollars!
After all, he had netted over a billion from this wave.
Don't think this is such a serious accusation. Back then, Musk of Tesla also crushed short-sellers with news of privatization.
He ultimately settled the charges by paying only $40 million, while the short-sellers lost tens of billions of dollars.
Meanwhile, Horwen, who had just gotten off the plane, nearly spat blood upon hearing the news.
So, Chen Pingjiang was just waiting for him to take the bait.
He had eagerly rushed to China, acquired shares from Chen Pingjiang to cover his positions, and then Chen Pingjiang immediately popped the bubble.
In the end, he made himself look like a clown!
And Horwen could do nothing about it!
It was like Jiang Taigong fishing: those who wished to take the bait did.
He knew very well that if he hadn't gone to see Chen Pingjiang, Renren.com wouldn't have issued the open letter terminating privatization.
Compared to Horwen, Carson, who had just gotten off the plane, appeared much calmer.
When interviewed by the media, he stated that he accepted the outcome of his gamble, was willing to pay for his mistakes, and that Renren.com was a truly excellent company, and its founder, Mr. Chen Pingjiang, possessed unparalleled charisma.
Carson stated that he would never touch Chinese concept stocks again from now on.
(End of chapter)