FOIAengine: Short Seller Fahmi Quadir Goes for Another Kill
To keep a nickname like “the Assassin,” the killer better not miss.
By the time short seller Fahmi Quadir was scheduled to take the stage on January 30 at a big investment conference in Miami Beach, she had already taken her shot – in the form of a 57-page chapter-and-verse indictment of a high-flying Wall Street stock.
Another direct hit.
This time her target was Adtalem Global Education (NYSE: ATGE). The company’s shares plunged as much as 30 percent after Quadir’s short-selling hedge fund, Safkhet Capital, announced it was betting against the for-profit education company and had taken a substantial short position in the stock.
At PoliScio Analytics, we’re always interested when we discover short sellers in our FOIAengine database. Often, they’re hiding in plain sight. Activist short sellers rely on the element of surprise. But an activist’s intentions are sometimes signaled. That is because the best short sellers are also obsessive fact gatherers, scouring esoteric sources to gain proof of corporate malfeasance or overvalued stocks. And the federal Freedom of Information Act sometimes provides their source material.
That’s what we found when we dug into the FOIAengine database after Quadir revealed her short-selling attack.
Fahmi Quadir, who seems to relish her reputation as “the Assassin,” is unique among short sellers. We’ll get back to the accusations she made, and the earlier signals we found, farther down. First, a brief recap of what short sellers do, and why they’re important.
Short selling is a legal trading strategy that, at its best, makes the stock market more efficient. An efficient market is one in which buyers and sellers have all relevant information upon which to base a trade. The short seller identifies an overvalued target, borrows shares in that company, and then sells them at the current market price. Later on, the short seller “covers the short” by buying back the stock at a hoped-for lower price, pocketing the difference.
The goal is to profit from the future decline in the stock price. Activist short sellers take that one step further, typically publishing a research report that makes their case against the company, and then widely disseminating it in the hope that others will join the selling and drive the stock price down even more.
Quadir followed the script above. Her report was a broadside against Chicago-based Adtalem, formerly known as DeVry, which booked $1.5 billion in revenue last year. The company runs a portfolio of for-profit schools in the healthcare sector, including American University of the Caribbean School of Medicine, Chamberlain University, Ross University School of Medicine, Ross University School of Veterinary Medicine, and Walden University.
Quadir’s report cited problems across the board: a business model relying on unsustainable federal aid dollars and student debt, abysmal graduation rates, and a federal investigation that hadn’t yet been disclosed.
The bottom line, Quadir claimed, is that Adtalem is “problematic at all levels: whether for the taxpayers, the students who enroll, or their shareholders. Radical change and rigorous oversight will be necessary to avoid further or even existential losses, and we are prepared to advocate precisely for that.”
Adtalem’s CEO was blindsided, hastily scheduling a conference call to tell analysts and investors that Quadir’s statements were “inaccurate” and “misleading.” The CEO called his company “strong” and “healthy” and released quarterly earnings early in support of that. Adtalem’s stock, still bloodied, recovered slightly. But it remained a very bad day for the company, and the worst overall for the stock since 2019. Adtalem’s market value declined by $400 million. Short-sellers betting against the shares earned a one-day profit of $12.7 million.
We searched FOIAengine to see if Quadir or her business partner, Christina Clementi, showed up. They did. In early 2022, Clementi made a FOIA request to the SEC about Ebix (NASDAQ: EBIX), a software supplier to the insurance, financial and healthcare industries. Safkhet Capital was watching the company, whose stock soon tanked. Read Safkhet’s August 14, 2023 report about Ebix here. Ebix is also on the radar of Bloomberg News, which made a FOIA request to the SEC about the company last November 21.
Although Safkhet Capital didn’t ask about Adtalem in the months before its attack, another requester did. Nick Winkler, an investigator at DuDil.net, submitted a request to the SEC on October 3, 2023.
Safkhet Capital also showed up in a FOIA request to the Food and Drug Administration on December 3, 2020 about Penumbra (NYSE: PEN), a speculative healthcare stock that took a 60 percent hit around that time, later rebounding.
Activist short sellers are reviled by the companies they target and the shareholders who suffer losses. As we write this, some are the subject of an ongoing federal criminal investigation for stock manipulation – while acting as federal whistleblowers and reaping multi-million-dollar rewards for turning in corporate malefactors.
The best-known short sellers like Quadir have cult followings on social media and websites devoted to ranking their successes – and, often, their noteworthy failures. We’re written about them before. See The Crook, the Tycoon, and the Short Seller; Whistleblower or Opportunist? A Short Seller Helps the Government; and Crash and Burn: Hindenburg Makes It Happen.
It’s a conflicted, complicated life that doesn’t lend itself to generalizations.
And that certainly is the case for 33-year-old Quadir. The daughter of Bangladeshi immigrants, she went to work as a securities analyst straight out of college, and soon made a name for herself. Her first big short was Valeant Pharmaceuticals, a hedge-fund darling that sank after Quadir uncovered misconduct. The Canadian pharmaceutical company saw its stock price drop by 90 percent, racking up losses of at least $2.8 billion for Bill Ackman’s Pershing Square Capital.
That was 2017. The next year she started Safkhet Capital, at age 27, and saw her Valeant exploits featured in the Netflix series Dirty Money. Her world changed. Passersby on the street recognized her. Tips came in. Her fledgling hedge fund made a smart bet against Wirecard, the German payments processor. A New Yorker profile says she “cleared tens of millions of dollars.”
According to a document filed with the Securities and Exchange Commission, Quadir’s two-person Safkhet Capital has its headquarters in a midtown New York co-working space and had about $26 million of self-invested cash to work with as of March 2023. With no outside clients, the firm withdrew its SEC registration early last month and no longer is required to make SEC filings.
But it still may need to make FOIA requests. We’ll keep watching.
Next: News media FOIA requests to the Federal Trade Commission.
John A. Jenkins, co-creator of FOIAengine, is a Washington journalist and publisher whose work has appeared in The New York Times Magazine, GQ, and elsewhere. He is a four-time recipient of the American Bar Association’s Gavel Award Certificate of Merit for his legal reporting and analysis. His most recent book is The Partisan: The Life of William Rehnquist. Jenkins founded Law Street Media in 2013. Prior to that, he was President of CQ Press, the textbook and reference publishing enterprise of Congressional Quarterly. FOIAengine is a product of PoliScio Analytics (PoliScio.com), a new venture specializing in U.S. political and governmental research, co-founded by Jenkins and Washington lawyer Randy Miller. Learn more about FOIAengine here. To review FOIA requests mentioned in this article, subscribe to FOIAengine.
Write to John A. Jenkins at JAJ@PoliScio.com.