We love seeing journalists making money in this wretched industry, but one emerging funding model is… hard to come to grips with.
Last week, hedge fund Hunterbrook Capital launched a news site called Hunterbrook Media. The news arm’s debut feature was a thoroughly reported piece investigating United Wholesale Mortgage, America’s largest mortgage lender.
Truth to power. Accountability journalism. Great stuff — when taken at face value.
But here’s how Hunterbrook Media pays for that reportage: Before anyone hit publish, the UWM article was presented to its affiliated hedge fund arm, which shorted UWM and invested in top rival Rocket Mortgage.
Now that feels a bit more unsettling.
Interesting, though
… Yeah, very much so. NiemanLab called Hunterbrook “one of the most unusual experiments in media ethics,” adding it was “rather bonkers” from a journalistic perspective.
Hunterbrook isn’t the only one short-selling their investigative targets — Hindenburg Research notably employs a similar model, and Mark Cuban’s Sharesleuth has been playing in this murky water since 2006.
But those other operations are more positioned as short-selling first, journalism second. That isn’t the case with Hunterbrook, which presents itself under a banner of independent journalism:
- It self-presents as a possible solution to media’s crumbling model.
- It trumpets its advisory board’s bona fides, trading off the credibility of The Wall Street Journal, ProPublica, and The New York Times.
That’s a risky road to take…
… It calls more attention to the org’s journalistic objectivity — and how difficult that must be to maintain when your livelihood is based on damaging the business you’re reporting on.
It also makes Hunterbrook the most intriguing hedge fund-reporter dalliance to date, as it presents a fascinating question:
- Can two industries combine forces to solve each other’s challenges — for journalists, anything resembling a stable business model; for hedge funds, reliable and actionable intel on its positions — without anyone selling out?
About that other question you may have…
Is all of this legal? They walk a thin line, but if Hunterbrook holds to its policies and never makes investments based on nonpublic insider information, then yes, it’s legal.
- While Hunterbrook is plainly aiming to coax a windfall at UWM’s expense, it has ultimately taken a swing at a public company with publicly available information.
So, it isn’t shady — Hunterbrook is admirably above board in describing its modes and motives — it just, by nature, feels shady.
