April 16, 2021
This week, The Pack takes a trip back to the early days of short selling only to find out that, sadly, not much has changed. In 1970, Kurt Feshbach (@Kurt_Feshbach on Twitter) was a high school dropout, described in one article as a “typical SoCal surfer” sporting long hair, flipflops and a tank top. Based on appearance alone, nobody could have known that his small company in California, Feshbach Bros., was actually one of the most feared Activist Short Sellers in the world.
Kurt takes us through his first trade (which netted him $5k) and through some of the biggest hits that, in 9 years, had Feshbach Bros. managing a billion dollars - for those keeping score, that’s an annualized return (IRR) of 232.4% - not bad for high school dropout.
Kurt went to war with journalists and banks while balancing a complicated relationship with the SEC and other regulators. He was criticized at the time for using what many considered to be unorthodox investigation techniques but has now become standard practice for top-tier Activist Shorts.
Kurt now runs https://bindlepaper.com. The Bindle Paper is an independent boutique research firm which produces deep dive, single-stock short research for a discrete and limited group of institutional clients.
bin·dle pa·per: A clean piece of standard-size, folded paper used to contain trace evidence.
Sit back, grab a drink, and enjoy the trip through time, knowledge, and experience that Kurt imparts during our fascinating conversation.
“We're doomed to repeat the past no matter what. That's what it is to be alive. It's pretty dense kids who haven't figured that out by the time they're ten.... Most kids can't afford to go to Harvard and be misinformed.”
― Kurt Vonnegut
1:05 Kurt talks about how he got started and the help he had from his partners and his father.
2:42 Go directly to jail, do not pass go, do not collect $200. Hear the long list of companies whose executives ended up in prison after dealing with the Feshbach Bros.
6:05 Kurt working on the sell side of Wall St, and meets a man that showed him the light, which led him to his first short idea.
12:26 A business is born; Kurt brings in his brothers and gets some seed money from a partner to start Feshbach Brothers.
15:03 Green energy was booming in the 1980’s - the problem was that most of them were frauds. Kurt made a killing exposing them, including one that claimed to create "clean" energy from human waste… turns out they were full of shit.
17:40 Kurt takes us through the process that they employed to obtain SEC filings via 1980’s technology.
28:06 Kurt talks about ZZZBest and Barry Minkow, one of the biggest and best shorts on his impressive track record, as well as a few others that were absolutely amazing finds.
34:55 All that swag, congressional hearings, and Robert Flaherty.
41:19 Picking through the trash, putting the puzzle together, and working with reporters to get your story out before the internet was invented.
48:48 How the market is essentially the same 40 years later, well except for the valuations...
58:57 Kurt addresses the "rumors" that Wells Fargo killed his business
1:06:38 The SEC and 20,000 pages of thermal paper.
1:19:39 The next big thing for Kurt: The Bindle Paper.