A seemingly minor news item on Thursday gave us the opportunity to
write about someone we have wanted to discuss for some time. The story
was that
Richard Chandler, a New Zealand-based billionaire, had purchased over 10 percent of Sino-Forest Corporation.
Sino-Forest, of course, is the China-based timber company that plunged
83% last month when Muddy Waters published a detailed report alleging
fraud.
Sino-Forest’s stock has moved up since the announcement of Chandler’s
new stake, so a few astute folks have already taken an interest.
However, we are betting most people just said “who is
Richard Chandler?”
and went on with their day.
That most people do not know who
Richard Chandler and his brother
Christopher are is not surprising, as they have been extremely secretive
since they started investing in 1986. That is
except for a single interview they did with Institutional Investor Magazine
back in 2006. Since that article was published, the brothers have gone
their separate ways and Richard now operates the Mandolin Fund which is
the entity that purchased the Sino-Forest stake.
While we have no horse in the race, we have found the Sino-Forest
situation to be fascinating. On the day the Muddy Waters report was
released, the market had the following set of information: In one corner
you had a virtually unknown one-man shop write a report suggesting
fraud at Sino-Forest. But in the other corner, the largest shareholder
of Sino Forest was John Paulson. Over the last two years, the
announcement of a Paulson investment in a company has been enough to
cause that stock to have a pretty good rally. Those facts would have
suggested that the market would have shrugged off the Muddy Waters
report and continued to coat-tail Paulson. However, the opposite ended
up occurring and the stock plunged. Paulson even followed suit – selling
out his entire position a few days later.
Ever since Paulson sold his stake, most folks have presumed Sino
Forest to be uninvestible. That was until the Chandler purchase.
