By John Hechinger and Jesse Westbrook
At least five investors who bet against British internet video and advertising company Blinkx benefited after a blog posting by a Harvard Business School professor last week triggered a share price plunge.
The investment companies are Luxor Capital Group, Blau GmbH, Jericho Capital Asset Management, Valiant Capital Management and Oxford Asset Management.
In the blog, titled ''The Darker Side of Blinkx'', Benjamin Edelman, an associate professor of business administration, said his research indicated Blinkx used deceptive software to inflate traffic counts and capture commissions.
Professor Edelman said he prepared the research for an unnamed client, adding this week he had been paid for the work by two unnamed US investors.
That expanded disclosure came after the stock tumbled and Harvard Business School, citing its conflict-of-interest policy, asked Professor Edelman for more information.
It's unclear if the investors who paid for the research profited from its publication.
Blinkx said it ''strongly refutes the assertions made and conclusions drawn in the blog post''.
Luxor and Blau increased their bearish bets in January, while Jericho first disclosed a short position on Blinkx last month.
In short sales, traders bet stock prices will fall by borrowing shares and hoping to return them at a lower price and pocket the difference.
Luxor had a short position of $US28.6 million ($32 million) in Blinkx shares. Jericho had a short of $US7.9 million on the same date. Blau's short position was $US12.4 million.Valiant reduced its bet against Blinkx by 1.6 million shares this week, a week after the blog posting, while Oxford has not changed the size of its short position since November 2012.
Investor Carson Block said on Wednesday he also took a short view on Blinkx shares. His Muddy Waters research firm was working on a report on the company when he was pre-empted by Professor Edelman.
Muddy Waters is well known in investment circles for profiting from a number of so-called short-sale investments when it has exposed what it claims to be irregularities in public companies such as NQ Mobile and Olam International, prompting share price collapses.
Blinkx shares rose 7.2 per cent to 115 pence in London trading on Thursday, giving the company a market value of £459 million ($838 million).
Before the rebound, Blinkx had slumped 43 per cent since the blog post. On January 30, the stock retreated 32 per cent, the biggest one-day decline since the company went public in May 2007.
Professor Edelman's initial disclosure said he prepared a portion of the article ''at the request of a client that prefers not to be listed by name'', and who let him include the research on his blog.
Professor Edelman said he was then paid by two US investment firms, which he declined to identify.
The investors had not changed their Blinx positions since the posting, he said. He did not say whether they were shorting its shares.
Professor Edelman said his clients' ''primary interest was in learning more about Blinkx's business, not in assuring I tell others''.
Bloomberg