Would You Pay a 22-Year-Old Stanford Grad to Expose Wrongdoing?

Edwin Dorsey (Illustration by Ryan Melgar)

Edwin Dorsey

(Illustration by Ryan Melgar)

Edwin Dorsey carves out a niche in the financial world: chronicling the doings of short-sellers.

If you know something about investing, Edwin Dorsey wants to meet you. And he’s very persistent about it.

Once, Dorsey repeatedly messaged a prominent investor until he got a meeting — and then took a 90-minute Uber ride to get there, because he didn’t have a car. He haunted another investor’s offices, popping in repeatedly with investment ideas. He wrote Warren Buffett so many letters asking to set up a sit-down that Buffett’s assistant felt it necessary to caution him not to fly to Omaha.

If this sounds like boyish overenthusiasm, Dorsey comes by it honestly: He’s 22 years old. He started pestering big-name investors for meetings when he was still in high school.

“I’ve always been a big believer that you’ve got to get your face in front of people,” Dorsey says. “Almost everybody has something to teach you. Even if someone isn’t a wildly successful person in their industry, they’ll know something you don’t.”

He’s already learned enough to carve out a niche for himself in the financial world. At an age when his peers are still learning the ropes, Dorsey is putting out a successful newsletter about a sector of investing that doesn’t get the sustained coverage it arguably should: activist short-selling, betting against a company’s stock while alleging fraud or other problems.

His work has won attention and praise from some of the big names in the field — and now he’s getting people to pay him for his investment ideas as well. “He’s got more moxie and drive than most people doing this for 15 years,” says prominent short-seller Marc Cohodes.

Dorsey’s newsletter, The Bear Cave, is part of a recent boomlet of efforts by short-sellers to tell their own story; Zer0esTV, Carson Block’s video-streaming service about shorting, is another. Most major business-news outlets cover shorting in scattershot fashion, if at all — even though activist shorts are helping uncover fraud at companies like Luckin Coffee and Wirecard — and the new ventures are trying to fill the information void.

“Just look at people’s track records and you’ll see a lot of times the short-sellers are the ones to blow the whistle first,” Dorsey says.

Every Monday, The Bear Cave brings together the latest developments in the shorting sphere: new targets of hedge funds and activist-research outfits, and notable news of the week, with other features often thrown in, like Dorsey’s own research and video interviews with shorts like Cohodes and Block.

Dorsey started the newsletter in February, shortly before he graduated from Stanford University with a bachelor’s degree in economics. What he initially conceived of as a “weekly little recap” has grown to 5,200 email subscribers.

The newsletter is free, but in October, Dorsey introduced a paid tier: For $34 a month, subscribers get two of Dorsey’s own research ideas monthly. More than 200 people have signed up, he says — generating enough income for Dorsey to make it his full-time job.

These aren’t short recommendations as such, he says. They’re companies with red flags that Dorsey uncovers by combing through documents and filing public-records requests. “The goal is not to say, ‘Just short it blindly.’” (In an idiosyncratic touch, he puts out his recommendations at 10:47 a.m.: Dorsey is a Batman fan — one of his Twitter handles is @BatmanResearch — and in some versions of the Batman mythos, Bruce Wayne’s parents were killed at 10:47 p.m.)

Yet unlike many people in the activist-short field, Dorsey doesn’t short the stocks he writes about. “I think it makes it simpler and more sincere and trustworthy,” he says. “You need to be intellectually honest and highlight stuff that people don’t know about and isn’t well publicized, and that’s stuff people will pay for.”

So far, his red-flag track record is mixed. His first three targets: energy-drink company Celsius Holdings, which is up about 50.1 percent since Dorsey’s report; online insurance marketplace EverQuote, which is down about 0.9 percent; and online-school operator K12, which is down 11.6 percent. (K12 said Dorsey’s report repeats old information “while misconstruing details and misleading the reader as to the current state of K12 operations and programs.” EverQuote declined to comment; Celsius couldn’t be reached.)

Dorsey got hooked on investing in elementary school, when his grandmother put some money for him into an E-Trade account. “I honestly think if you asked me in third grade what I wanted to be, I would have said investor.” He started writing for stock-research platform Seeking Alpha as a teenager and “cold-emailed so many people,” trying to set up meetings.

He met two prominent short-sellers early on — Cohodes and Jim Carruthers of Sophos Capital Management — and that got him interested in shorting. Long investing is “just trading pieces of paper back and forth,” he says, but “with short-selling, it’s different. If you expose misconduct, the company can change.”

His first foray into activist investing came when he was a Stanford student and wrote about Care.com, an online service matching caregivers with clients. He found what he claimed were inadequate safeguards at the company, and indications that Care.com was letting through babysitters linked to children’s deaths or abuse.

“This had real safety issues and no one was talking about it,” Dorsey says. So he decided to test out the platform for himself: He applied to be a caregiver using Harvey Weinstein’s name and photo — and got approved. He applied for babysitting jobs as “Harvey” before the company took down his account.

Dorsey wrote about his findings online, and apparently Care.com complained to Stanford — because a Stanford dean called Dorsey on the carpet about it. “They made it clear I could get in a lot of trouble if I didn’t take [the story] down.”

But Dorsey stood his ground and, subsequently, The Wall Street Journal published a story supporting his allegations about the company and citing his work. Care.com’s CEO resigned, the company beefed up its screening practices, and the stock price plunged from over $25 to as low as $9.

That gave Dorsey a taste of what short-selling could do — not to mention “a lot of credibility.” (Stanford and IAC, which bought Care.com last year, declined to comment for this story.)

He convinced Cohodes to meet with him, even though the veteran short-seller initially wasn’t taken with the idea. “I told him, ‘I’m not into that kind of stuff,’” Cohodes says. But “he just wouldn’t stop,” and when the two ultimately met — after Dorsey took his 90-minute Uber ride from Stanford up to Cohodes’ Northern California farm — they talked for two hours.

“He’s definitely persistent as all get-out, and he definitely has the skeptical gene,” Cohodes says.

Carruthers says that after he befriended Dorsey, “he would continually just show up, come into the office, tell us about his next idea. He would put Post-It Notes on a desk to tell me the story.” (To be fair, Sophos Capital was only five minutes from Stanford’s campus and thus a much shorter trip for Dorsey.)

Carruthers says that when Dorsey came up with the idea for his newsletter, “I told him, ‘You won’t get rich immediately, but you’re going to get a lot of people in the hedge-fund world paying attention to you.’”

Dorsey knows, of course, that when many investors think of short-sellers, they think not of eager 22-year-olds jousting with shady companies but of bad guys practicing a dark art to drag a company down and enrich themselves.

He’s hoping efforts like The Bear Cave and Block’s Zer0esTV can help change that perspective.

“With short-selling, you can actually change something,” Dorsey says. “It’s part investing and part being a social activist.”

Block says his aim with Zer0esTV is “to humanize and demystify the process of short-selling and the research that we do.” When he talks to long investors, they’re “genuinely surprised I’m not insane and not bent on destroying the world.”

He says he’s “really happy” with how Zer0esTV has gone so far, and he likes Dorsey’s work with The Bear Cave. “I do think it’s really nice to have someone who’s aggregating the news stories from the short world,” Block says. “I think this is a smart approach — build it, get scale, see what happens.”

Dorsey foresees “an explosion” in activist shorting, as technology makes it a simpler strategy for more people to use and a frothy market creates more shorting opportunities to take advantage of. So while he might change course down the line — work at a hedge fund or start his own activist-research outfit — for now, he plans to see how far The Bear Cave can go.

“My goal is to be the newsletter to go to to follow all the happenings,” he says.