Though the legacy of his short selling activities follows him, the positive contributions made by Manuel Asensio to the marketplace may be observed in several case studies selected from his impressive investment career, including the Manuel Asensio investigations of Winstar, Chromatics Color Sciences, Evergreen Energy, NVE Corp., Hemispherx Biopharma, and Pegasus.  In each instance, the Manuel Asensio investigation provided invaluable assistance to journalists, regulators, legislators, and investors.  Writing in the Ludwig Von Mises Institute, Christopher Mayer credits Manuel Asensio with “uncover[ing] numerous cases of outright fraud.” The article clearly details specific contributions that the Manuel Asensio short-selling method made to the securities industry.   As a short seller, Manuel Asensio transcended the promotion and hype surrounding stocks.  He is among the best researchers and investors in the business and his tremendous success as a dedicated short seller is evidence of it.

The work product of Manuel Asensio clearly shows his collaboration with journalists, regulators, legislators and the important price discovery information he made available to investors.  Such mainstream journalists as Jim Cramer have praised the contributions of the Manuel Asensio research method.  Information disclosed in his research reports has revealed serious issues within regulatory organizations and led to important reforms.  He has informed reporting on powerful figures involved in fraudulent stock promotions.   Most importantly, the research reports produced by Manuel Asensio reconciled stocks with fair prices and protected investors from misguided investment decisions.  

The short selling research reports of Manuel Asensio were always contentious and controversial.  However, his investigations of questionable companies reflect his strong commitment to high business and ethical principles.  In each of the examples provided in the summaries below, the work of Manuel Asensio helped protect investors’ interests.  He regularly battled prominent members of the securities industry who were involved in unreasonable stock promotions.  In his own words, “A stock promotion…is a stock whose price is not based on fundamentals—on the company’s sales and profits and an assessment of the future potential its business—but solely on the ability of its promoters to conjure up schemes”     

Though Manuel Asensio is best known for his short-selling activities, it is important to understand that he has well documented experiences on the long side; an example of this is his work on Coca-Cola.  In January 1994, Manuel Asensio disproved John Neff’s claim in Barron’s Roundtable that Coca-Cola was the “Philip Morris of the year.”  Neff believed Coke’s earnings growth depended on price increases and considered the stock over-promoted.  He also believed Coke had problems in foreign markets due to pricing and cultural differences.

 Manuel Asensio showed that Coke’s prices increase with inflation and that the company’s earnings outpaced sales because of operating leverage, and not price increases as Neff posited.  The operating leverage is the result of Coke’s bottlers.  Manuel Asensio observed that Coke only supplies the concentrate for the soda; its bottlers bottle and distribute the soft drink.  In the U.S., Coke’s operating income has more than doubled since 1986 without any price increases.  Moreover, the culture issues Neff identified were unimportant.  Coke raised approximately 80% of its operating income overseas in markets of various cultures at the time of the report of Manuel Asensio.

Manuel Asensio continues to work with leaders in the securities industry, facilitating fair pricing and protecting investors’ interests.  He recently met with AMEX’s CEO and Vice President to discuss his experiences as a short seller and to explore ways of using his professional experiences to educate the Exchange on how to detect and prevent stock frauds.  As long as he works in the securities industry, Manuel Asensio will continue to use his superior investment and research skills to uncover the materially valuable information about stocks. He expects to achieve commercial successes in the marketplace while maintaining a high degree of professional integrity.  

Manuel Asensio : Short Selling Advocacy and Investor Protection

Each of these cases represents a signature transaction by well known investor Manuel P. Asensio.  The purpose of the summaries is to demonstrate how Mr. Asensio’s research benefited the securities industry.  In addition to running a successful investment company, Mr. Asensio’s analysis helped journalists, regulators, and legislators create a fair marketplace.  Most importantly, Mr. Asensio challenged overvalued stocks, protecting investors from making uninformed choices.

1. Manue Asensio Investigation of Winstar Leads to Important Regulatory Reforms for Analysts’ Conflicts of Interest 

The Manuel Asensio investigation of Winstar helped regulators bring about improvements oversight of analysts’ conflicts of interest.  Asensio & Company, Inc. initiated coverage in February 2001 after Winstar announced “strong fourth quarter results” to the applause of seven major Wall Street Firms that followed the company.  In addition to an obvious profit motivation, Manuel Asensio was concerned that a company with a significant amount of meaningless hype could easily catch the attention of misinformed investors.  Before the announcement, Manuel Asensio composed five letters to Winstar, requesting an explanation for a number of irregular financial transactions reported in its financial statements.  When he did not hear from Winstar, Manuel Asensio published four reports on his web site.   Jack Grubman was among the analysts touting Winstar.  At the time, Mr. Grubman was one of Wall Street’s most famous analysts, working for one of its most powerful firms, Citibank Smith Barney.  Mr. Grubman criticized the Manuel Asensio research reports on Winstar and repeated his strong buy recommendation despite the obvious problems with the company’s financial statements.   A few weeks later, Winstar announced its bankruptcy.  Soon after, Jim Cramer published “Jack Grubman Follows Winstar to Shame” at TheStreet.com.  Cramer rebuked Grubman for dismissing Asensio and credited Asensio with understanding the [CLEC] industry far better than Grubman.”  According to Cramer, Asensio predicted Winstar’s demise “almost to the day.”  In July 2001, The Wall Street Journal publicized the obvious conflict that resulted in Mr. Grubman’s disingenuous Winstar promotion.  The high profile story increased investors’ awareness of conflicts between investment banking and sell side research.  By July 2002, regulators approved new disclosure rules to prevent future occurrences of these types of events.

 2. Manuel Asensio Investigation of Chromatics Leads to Important Changes for Analyst Oversight at Dreyfus

The Manuel Asensio investigation of Chromatics revealed serious problems in the securities industry.  His research disclosed that a money manager at Dreyfus abused his position as portfolio manager of two mutual funds.  Mr. Asensio wrote a report about the money manager in June 1998.  Soon after, BusinessWeek featured two articles on the Dreyfus manager’s questionable investment activities (“What Dreyfus Didn’t Divulge” and “Dubious Dealings before Dreyfus”).  In July, both TheStreet.com and The Motley Fool printed stories about the fund manager.  The Wall Street Journal published “SEC Considers Toughening Trading Rules for Managers.”  As a result of Mr. Asensio’s short selling research, Eliot Spitzer, then Attorney General of the State of New York, commenced his first Wall Street prosecutions.  U.S. Federal Judge Harold Baer Jr. stated that Mr. Asensio’s research reports demonstrated that “the merits of the Dreyfus case were promising from the outset.”  The Southern District’s decision includes multiple references to Mr. Asensio’s research report on the Dreyfus portfolio manager, including Mr. Asensio’s contention that the portfolio manager purchased stock for himself privately before purchasing stock for the mutual funds in the open market.    

3. Manuel Asensio Investigation of Evergreen Energy Reveal Serious Issues in Alaska’s Office of Attorney General

In September 2004, Manuel Asensio published three reports divulging discoveries uncovered through his research of Evergreen Energy’s unsavory business relationship with the State of Alaska.  His work revealed that Alaska’s Attorney General made an undisclosed personal investment in Evergreen Energy and worked as a consultant with Evergreen’s leading executives before Alaska decided to contract Evergreen.  By October 27, the Attorney General vowed to donate his trading profits from his Evergreen investment (profits earned via shares purchased shortly before an analyst touted Evergreen on CNBC) to charity.  On February 6, 2005 the Attorney General resigned.  Alaska soon changed its ethics rules governing the Attorney General’s business relationships.  The research of Manuel Asensio and Asensio helped journalists publicize serious supervisory issues at the state level and exposed important legislative problems helping lawmakers pass important reforms.  The Anchorage Daily News printed major stories on these events, including “State Official Could Profit in Trade Deal,” Wev Shea weighs in on Renkes,” and “Scrutiny began in September.” 

 4. Manuel Asensio Investigation Protects Investors from Hype Surrounding Nanotech Technology 

Throughout his career, Manuel Asensio has remained committed to protecting investors from fraudulent stock promotions.  A few years ago, the nanotech industry consisted of companies using empty promotions designed to attract uninformed investors.  Manuel Asensio immediately responded to the situation.  In March 2004, Manuel Asensio commenced an analysis of NVE Corp, revealing serious problems with companies boasting nanotechnology labels.  Moreover, Manuel Asensio observed that Merrill Lynch had introduced an index featuring 25 nanotechnology companies, many of which did not have anything to do with nanotechnology.  Manuel Asensio contacted Eliot Spitzer, the New York Attorney General, positing that the “misuse of the nano label has become a favorite tactic for fraudulent stock promotion.”  The Attorney General then initiated an investigation.  A New York Times article published in April 2004 details the events.  The Manuel Asensio investigation was part of an effort to make money from short selling.  In doing so, he gave journalists access to otherwise undisclosed information.  He also helped legislators investigate questionable stock promoters.  Finally, and most importantly, Manuel Asensio research protected investors from investing in bogus nanotech companies.

5. Manuel Asensio Investigation Leads to Important Reforms within the AMEX

In addition to generating large returns, the Manuel Asensio research reports helped bring about important reforms within the regulatory community.  Manuel Asensio began his analysis of Hemispherix Biopharma in 1998.  His research quickly revealed the company’s troubling history of litigation.  It seemed Hemispherx used the courtroom to protect itself from criticism and to conceal important information about its business practices from public attention. Of all his short selling projects, the Manuel Asensio work on Hemispherx was most difficult.  He would have fared better if he simply stayed away from the company altogether.  However, Hemispherx attracted his attention for obvious reasons.  Its stock was grossly overvalued and Manuel Asensio found it unacceptable to permit company executives to exploit uninformed investors.  The Manuel Asensio coverage of Hemispherx led to his involvement with congressional investigations of the fraudulent company, after efforts to work with regulators failed.

Hemispherx was one of the last stock frauds committed by the bucket shop Stratton Oakmont before a criminal investigation forced the organization to close.  Manuel Asensio believed the American Stock and Options Exchange (“AMEX”) did not exercise sufficient diligence to protect investors from Hemispherix and so investigated the company himself.  He soon discovered that both a Governor of AMEX and a high ranking floor official owned shares of Hemispherix.  Still worse, Manuel Asensio obtained an offering memorandum in which the AMEX governor boasted of profits earned by trading Hemispherix shares.   

The Manuel Asensio discoveries soon led him to speak with the press.  In addition, Manuel Asensio met with two members of congress and the Chief of Staff of the Ranking Minority Leader of the House Commerce Committee, responsible for overseeing the U.S. Securities and Exchange Commission (“SEC”).  Both members contacted senior officials within the SEC on behalf of Manuel Asensio, one writing to Chairman Arthur Levitt and the other contacting Chairwoman Laura Unger.  In addition, the Ranking Member John Dingell wrote the U.S. Comptroller General about the issues with AMEX and noted allegations of Manuel Asensio.  The Comptroller agreed to investigate the case. Manuel Asensio fully cooperated with this investigation.  In November 2001, the GOA issued its report on the matter (“Improvements needed in the AMEX Listing Program”).  As a result, AMEX was sanctioned and forced to incorporate SEC-mandated regulations into its listing procedures.  The AMEX leadership changed and the new AMEX leader was eventually barred. The Floor Official was also barred.   

6. Pegasus Wireless Corporation

The research reports of Manuel Asensio also exposed and publicized serious issues with the procedures for selecting companies to ring the opening bell at the National Association of Securities Dealers Automated Quotations ("NASDAQ").   Too often exiting new tech companies engaged in outright fraud received the honor of ringing NASDAQ’s opening bell.  Pegasus Wireless Corporation was engaged in highly irregular and improper activities and enjoyed unwarranted credibility because NASDAQ officials tapped its CEO to ring its opening bell.  Manuel Asensio began his work on Pegasus in July 2006.  The company already boasted a list of questionable activities and characteristics, including a serious conflict of interest with its accounting firm, a CEO whose boat was repossessed, dubious connections to a Taiwanese national accused of embezzling more than $525 million, and relationships with felonious attorneys.  Despite the questions surrounding Pegasus, NASDAQ invited the company’s CEO to ring its opening bell and then featured him in a NASDAQ Signature Series interview on the NASDAQ web site.  When Manuel Asensio began his research, Pegasus was trading at approximately $18 per share.  By September 2006, the price fell to $1.  Today Pegasus shares are available for about 3 cents.  In early 2007, Pegasus’ CEO moved the company’s offices from California to the Bahamas and opened a manufacturing plant in an area with high unemployment.  After unjustified applause, Pegasus’ 200 workers were laid off because the plant closed.  Its new product, “Cynalynx,” did not work.  Meanwhile, the CEO managed to purchase a new $2.5 million yacht he keeps offshore.  The Manuel Asensio research reports protected investors from purchasing shares of Pegasus at inflated prices.