On April 11, 2018, institutional investor Sahm Adrangi issued a negative report on QuinStreet, Inc. In this report, he explained why his company, Kerrisdale Capital Management, LLC, had taken a short position on this firm. QuinStreet is an internet marketing firm headquartered in Foster City, California. Their stock has quadrupled in recent times and he says his analysis shows this is very unjustified. This company hadn’t been doing well for a long period of time but investors believe this company has been turned around and is doing well. Sahm Adrangi says this is an illusion as QuinStreet has a lot of fake web traffic.
QuinStreet’s business model involves being in the middle of the transaction between a website and online advertisers. Someones go to one of these websites, such as to shop for a new credit card, and QuinStreet manages the ads they see while doing so. However, Sahm Adrangi says they have an outdated business model and this company is very unlikely to survive as how online advertising is managed is rapidly evolving. He also pointed out that almost all the money QuinStreet is generating is coming from just one of their clients, something that the management of this firm doesn’t talk about.
Sahm Adrangi says that his research and that of his company’s analysts show that their recent increase in revenues has been faked. He says QuinStreet has been using malware redirects, bogus leads, and other sketchy ways of generating traffic to their client’s websites. To find out his information he and his team talked to people who used to work for QuinStreet who revealed what was really going on at this company.
Sahm Adrangi, a Yale University graduate, and been in the financial industry for over 10 years. He started out as Deutsche Bank where he worked in the leveraged finance investment banking department. He then moved to Chanin Capital Partners where he was an analyst in their restructuring investment banking group. Just before opening his own investment firm he had worked for Chanin Capital Partners where he was also an analyst.