These two days off were constantly filled with a public opinion war.
Naturally, there was an endless stream of pessimistic voices from the US, which, transmitted to China, led major financial commentary programs to prepare to mourn Renren.com.
Everyone could see that Renren.com was about to suffer misfortune.
And it was going to suffer greatly; there were almost no means left to save Renren.com's stock price.
As soon as the market opened on Monday, Renren.com's stock price was bound to flash crash.
This weekend, the heads of major short-selling firms were not idle, busily spreading various negative emotions on Twitter and ridiculing Chen Pingjiang as much as possible.
However, Chen Pingjiang paid no attention to this group of people!
November 21st.
As soon as the market opened, Renren.com's stock price immediately flash crashed, just as anticipated.
The Wall Street short sellers were gathered together at this moment.
"What a pity, if I didn't have other work this morning, I'd really like to pop a champagne and celebrate,"
Carson Block said triumphantly, holding a cigar in his mouth and taking a deep puff.
Andrew laughed heartily,
"Buddy, we're going to make over a billion dollars today, what other work do you care about? Can your other work earn that much money?"
Steve Cohen of hedge fund Point72 also nodded,
"I propose we all have a drink to celebrate this imminent victory. Chen Pingjiang is dead this time; by the end of today, the price will surely drop below one hundred, and that's when I'll buy back and return."
"I agree, we've won so much money this time, not opening champagne is simply unacceptable."
"Those retail investors are simply stupid. How can they fight us? Don't they know we're all familiar with each other in business? Hmph, and Chen Pingjiang, shorting his stock and he still wants to resist."
The cigar room was filled with smoke, and a group of Wall Street tycoons laughed heartily, the atmosphere relaxed and pleasant.
At this moment, a secretary in a suit and tie walked in quickly, and with a solemn expression, said to Horwen,
"Sir, this is bad. Chen Pingjiang posted a tweet."
Horwen's smile abruptly stopped. He looked at his secretary's panicked expression with some curiosity,
"What tweet did he post that makes you so flustered?"
"He... announced privatization."
"What?"
"FUCK!"
The next second, as everyone cursed, the gentlemen could no longer smile and quickly ran out of the cigar room.
Carson Block quickly found his laptop, opened Chen Pingjiang's Twitter, and his face changed after clearly seeing the tweet.
[I am considering taking Renren.com private at a premium, at a price of $180/share, and the funds for privatization have been secured. At that time, Renren.com shareholders can sell their shares at $180/share, or choose to continue holding Renren.com equity after its privatization.]
Andrew shouted,
"This is definitely false, he's just putting out a smokescreen! Where does he get the money to privatize? I don't believe it. I just calculated it; based on $180/share, the total consideration offered by the privatization deal for Renren.com is approximately $7.6 billion. I swear, Chen Pingjiang must be doing this on purpose just to push up the stock price. I'm going to report him to the SEC for stock manipulation."
Horwen, the king of short sellers, shook his head,
"Although we all think this is fake, investors might not believe it. Besides, Chen Pingjiang has a series of other excellent companies in China. If he really goes all-out, sacrificing everything, and mortgages his equity to banks, he truly might be able to get that much money."
"Horwen, so you mean what he said is true? He's really planning to privatize? You know that Renren.com didn't even raise $7.6 billion in the US stock market, and now he's going to use that much money to privatize, directly admitting losses and leaving the market?"
Horwen spread his hands helplessly,
"I don't know, it's all my speculation. I don't understand this Chinese man; I only know that he has too many excellent companies under his belt. If we push him too hard, he might indeed make such a choice."
Plotkin of Melvin Capital also panicked,
"Guys, whether Renren.com privatizes or not is a matter for later, and reporting to the SEC is fine, but it takes too long. How do we get through this immediate situation?"
As soon as he asked that, everyone was stumped.
First, no one knew whether what Chen Pingjiang said was true or false.
If it was true, then Chen Pingjiang was too crazy, willing to lose himself just to drag them down.
But if it was false, their questioning and reporting would take time; by the time the SEC acted, a month or two would have passed, and they would all be dead by then.
"OH, SHIT! Renren.com's stock price is rising too fast."
As soon as Chen Pingjiang's tweet was posted, Renren.com's stock price shot up like a rocket.
In less than half an hour, it rose from $122.75 to $147.23, and the upward momentum showed no signs of stopping.
If a listed company announcing a stock repurchase plan was just an ordinary bomb.
Then privatization could be considered a nuclear bomb.
Generally, privatization transactions usually involve a 30%-50% premium, causing related shares to surge, and investment returns are very substantial.
Therefore, investors have always been lying in wait, betting on this.
Privatization indicates that the major shareholder believes the company's current valuation is significantly undervalued, and to get shareholder approval during privatization, a competitive price must be offered.
So it rises!
Moreover, when Chen Pingjiang posted the tweet, Renren.com's stock price was only $122.75, but he was willing to offer $180 for repurchase.
This means a 46.6% premium!
It means if you can buy Renren.com stock now, you'll profit immediately.
Anyway, it can be sold to Renren.com for $180 at that time.
There's a backstop!
Everyone unanimously expected the stock price to rise. Those holding shares were even more reluctant to sell, while those without Renren.com shares quickly bought in, ultimately leading to a massive surge.
Carson Block quickly said,
"Guys, I need to get back to the company right away."
Just as he was about to slip away, Horwen called out to him,
"What's the rush? Are you going back to close your positions? Damn it, you can't do that. We need to stick together and figure something out now."
Plotkin gave a bitter smile,
"Now retail investors all over the world are buying Renren.com shares, what more can we do? Will they listen if we tell them?"
"FUCK! If we don't even try, we're going to lose terribly, do you understand? Our positions are already over 6%; if a short squeeze happens, we'll all be ruined." Horwen waved his hand, "Don't panic, all of you go back first and create some momentum to slow down Renren.com's stock price surge."
After seeing off the heads of the short-selling institutions, Horwen slammed the wine glass in his hand with a 'bang', somewhat unwillingly.
Then he posted a tweet.
[Renren.com is like Lehman Brothers in '08. They have many similarities, such as threatening short sellers, refusing to raise funds, and publicly announcing privatization. Months later, when management's reckless actions led to bankruptcy, shareholders, creditors, employees, and the global economy paid a huge price. I seriously doubt Chen Pingjiang's motives.]
Meanwhile, Andrew of Citron Research also reported Chen Pingjiang to the SEC.
However, given the efficiency of the Americans, the SEC wouldn't respond for at least half a month.
The reason is simple: how would the SEC know if my privatization is real or fake?
Should the SEC investigate, Chen Pingjiang would pretend to discuss equity pledges for other companies with the Big Four banks.
This kind of nuclear bomb cannot be resisted by human effort.
Unless Chen Pingjiang changes his tune a few days later, or takes no further action.
As for why shareholders trust Chen Pingjiang so much, believing whatever he says?
Because Chen Pingjiang is truly rich, and secondly, with Renren.com's stock price being shorted, it's the perfect time for privatization.
No one dared to buy the stock, it lost its securities lending function, and coupled with its founder believing the stock price was undervalued, what was there to wait for besides a repurchase?
The most crucial thing is that no one would have expected Chen Pingjiang to actually dare to bluff, who would have thought he would put himself on the line?
If the privatization were proven false, Chen Pingjiang would not only face lawsuits, pay compensation and fines, but also have to leave his position as Renren.com's chairman.
This would escalate things significantly, and no retail investor thought Chen Pingjiang was that foolish.
Funnily enough, after Horwen's tweet was sent out, a bunch of retail investors almost cursed him into self-isolation.
"Disgusting short sellers, actually delaying us from making money!"
"Renren.com is privatized, short sellers won't have time to run away! That's why they're so anxious."
"Everyone buy quickly, don't listen to him, there are very few floating shares on the market."
What's even more incredible is that Twitter officially intervened, directly banning several short sellers for 48 hours!
And so, the world became quiet!
Horwen looked at the message prompting his account's ban, his entire body boiling with rage, and he smashed his computer directly.
This time, he also experienced the pain of having his internet cable "pulled"!
No choice, who made Chen Pingjiang the second largest shareholder of Twitter?
To get Twitter to "pull the plug" on a few short sellers first, Chen Pingjiang reached a series of quid pro quos with Twitter's CEO.
Renren.com's stock price continued to rise, reaching $162.76 by the close of morning trading.
The pressure on the short sellers grew.
The secretary walked in again at this moment. Horwen, in a fit of rage, glared at him impatiently,
"What now?"
The secretary said somewhat nervously,
"The brokerage firm wants us to return Renren.com's shares today..."
"..."
Horwen felt like he had somehow offended the gods.
Why were there no good things, only bad things one after another?
After thinking for a moment, Horwen still felt a bit unwilling,
"First, sweep the market to buy shares to return to Goldman Sachs. I'll figure something out later; for now, don't disclose this externally."
As soon as Horwen began buying Renren.com shares in the secondary market, it immediately caused Renren.com's stock to rise again, further pushing up the price.
$167.43!
This was actually a stab in the back for other short sellers, but Horwen had no choice; the shares he borrowed from Goldman Sachs earlier were due today.
After deducting fees, he still lost several hundred million dollars.
He planned to return them, then borrow again from someone else, and continue to crash the price!
Could the duck already in his mouth still fly away?
However, Horwen soon couldn't laugh anymore.
In just half an hour, Renren.com's stock price reached $172.63!
This made him clearly feel that something was wrong!
...
Dongjiang.
Chen Pingjiang was leisurely drinking coffee. Bu Housheng, across the screen, smiled and said,
"Chairman Chen, there should be long-position institutions entering the market. They also saw the short sellers' fatal weakness, but I don't know who they are yet. They've been holding back, not showing themselves or speaking out, using the name of retail investors to profit from the short-selling institutions."
The situation was now very clear.
On the surface, it looked like a grand drama of peasants fighting landlords, but in reality, it was a Mission Impossible-esque drama where a group of landlords hid among a large group of peasants to fight another group of landlords.
By the close of Monday, Renren.com's stock price was fixed at $173.41.
At the opening on Tuesday, Renren.com continued to open higher at $175.16.
This price was already $5 higher than before the short-selling institutions entered the market.
By the afternoon, the stock price had soared to $187!
Plotkin of Melvin Capital had lost his usual composure. With deeply sunken eyes, he shook his head, somewhat tiredly.
Just now, the brokerage firm had called, asking him to add more margin.
He had few choices left.
Forced liquidation or a margin call leading to a complete wipeout!
After only a few minutes of contemplation, Plotkin unhesitatingly chose forced liquidation.
Better to let others die than oneself; if he kept playing, he would be ruined.
He entered the market to short Renren.com relatively late, with his initial selling price being only $142.
With Melvin Capital's initial surrender, he had to buy Renren.com shares back in the market, transferring the pressure to other short sellers, causing the stock price to surge once again.
In reality, a "short-killing-short" situation had formed, with short sellers scrambling to close positions, creating a continuous upward positive feedback loop for the stock price.
The domino stocks tumbled down.
The short squeeze began!
Carson of Muddy Waters stared dumbfounded at Renren.com's skyrocketing stock price and cursed,
"Shit, they talked about solidarity, but they ran off themselves and left us locked out!"
Renren.com's latest stock price: $201.97!
Even at this price, there was no market!
Carson couldn't buy enough shares to close his positions and could only watch helplessly as the price continued to climb.
A short squeeze!
It was truly painful!
At 3 PM, Renren.com's stock price surged to $297.65!
The rate of increase was accelerating.
Because everyone was running, frantically buying Renren.com shares.
Longs were buying, and shorts were buying too!
3:15 PM.
Renowned short-selling institution Citadel (hedge fund) lost $2 billion and announced its exit.
3:20 PM.
The hundred-billion-dollar hedge fund, Melvin Capital, directly faced a margin call and lost 30%.
Gabe Plotkin, Melvin Capital's fund manager, told CNBC that after incurring massive losses, the firm had closed its short positions on Renren.com on Tuesday afternoon.
Andrew, founder of Citron Research, also told the media,
"We have bought back shares to cover our positions, and in the future, our company will not express any opinions on Renren.com stock."
The unspoken meaning was a quiet declaration: can't mess with it, can't mess with it, better to respect it and leave!
In the last part of the interview, Andrew also stated that he would sue Twitter, asking why they banned him for 48 hours!
By the close of trading on Tuesday at 4 PM ET, Renren.com's stock price had surged to a terrifying $423.54.
Its market capitalization reached a frightening $264 billion.
Short sellers were all scrambling to escape, but some were still trapped inside!
Like Carson.
He was practically dying of anxiety.
He didn't have enough money to close his positions, couldn't meet the margin call, and was on the verge of being wiped out, so he started begging everywhere for money.
(End of Chapter)