TOKYO: A decade after his bearish bet on Nidec Corp, prominent short seller Carson Block says the current scandal engulfing the motor maker shows Japan’s corporate reforms haven’t gone far enough.
“There are a number of problematic companies, and it’s a market where people just haven’t really been held accountable,” Block said in an online interview.
“There’s real dysfunction, and transparency is needed from activist short sellers and the media.”
Nidec has been mired in an accounting scandal since last year and faces potential delisting from the Tokyo Stock Exchange after failing to secure an auditor’s opinion on its financial statements.
Probes revealing widespread fraud at some of Nidec’s subsidiaries came almost a decade after Block’s hedge fund, Muddy Waters Capital LLC, cited “aggressive” accounting, “questionable” dealmaking and corporate governance concerns in a 2016 short report.
The fact that the market overlooked Nidec’s issues for so long highlights the “active conspiracy of silence” surrounding the company and broader corporate Japan, Block said.
Muddy Waters’ report received almost no attention at the time, and the fund covered its short position soon after taking it, he said.
Block expects further fallout from Nidec’s accounting irregularities, saying the company’s investigation into its practices didn’t adequately cover the time period around Muddy Waters’ report.
Nidec recently booked 632 billion yen in writedowns for the year ended March 31, after releasing the results of a third-party probe that formally covered fiscal 2020 through the first quarter of fiscal 2025.
The investigation also looked at “earlier periods when it was deemed necessary to analyse causes and so on,” Nidec said in a statement.
“The investigation clearly omitted a number of years when it was obvious there were problems,” Block said. “I do think one could question whether the scope of Nidec’s problems is known at this point.” — Bloomberg
