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 Europe has caught Block's attention because he believes investors
there do not scrutinize corporations and their management with the
same vigor as in other parts of the world.
"You just find a lot of filth there," Block told Reuters on the
sidelines of the Absolute Return Symposium in New York on Wednesday.
The short seller's publicly disclosed recent forays into Europe
include a bet against French supermarket operator Casino Group,
where Block is wagering the company's stock will fall because of its
high debt burden.
He is also shorting the stock of Rallye SA, the majority shareholder
of Casino, and TeliaSonera, a dominant telephone company in Finland
and Sweden.
"You just find a lot of filth there," Block said of European
securities.
Block recently launched a $100 million hedge fund after years of
churning out research at his firm Muddy Waters LLC. He is best known
for targeting the shares of China-based companies that he believed
were frauds.
Block, a trained lawyer who started his career as an equity analyst,
also said he expects become more active in shorting corporate bonds,
something activists have generally shied away from.
Credits rated just above junk status, or BBB-, are a category of
bonds where Block expects to find plenty of opportunity to find new
short ideas.
"We are going to do more credit-based shorts going forward," Block
said.
He also noted that he his avoiding shorting biotechnologies, addling
they "do not make for good shorts" because the companies' scientific
claims are hard to verify or discredit.
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A lengthy research report in 2011 that alleged Chinese forestry
company Sino-Forest Corporation was a fraud cemented Block's
reputation and he has since become a well-known name in the
relatively small community of short sellers, or firms that focus on
betting against securities.
He distributed the research for free and said that it took him years
to create the hedge fund, which was officially born through a
regulatory filing in January.
Even as his focus moves to other geographies, Block has not
forgotten about Asia. "We always pay attention to China because we
love to short stock frauds," he said.
Creating the hedge fund was a long time in coming, Block said,
adding that for now, he is happy staying at a relatively small size.
(Reporting by Svea Herbst-Bayliss, editing by G Crosse)
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