A prominent short-seller is adding a new client fee to pay for beefed-up security

One of the world’s most prominent short-sellers in the world is asking its backers to help cover its rising security costs.

Carson Block’s Muddy Waters Research — which manages more than $500 million, according to regulatory filings — is adding a new fee that could be as high as 0.1% to pay for security costs, a person close to the manager told Business Insider.

The firm’s principals will also chip in to pay for security costs, the person added. There wasn’t a single event that led to this decision, the person said; the firm decided to increase security in response to rising safety concerns.

Muddy Waters declined to comment.

The firm is known for its public campaigns that uncover corporate fraud. Muddy Waters’ website states that it “peels back the layers, often built up by seemingly respected but sycophantic law firms, auditors, and venal managements” to uncover a company’s true value.

The contrarian investing style is often lauded after the fact, but can generate plenty of adversaries during a public campaign. Block’s fund made its name, in part, by identifying fraud at Chinese companies that were traded on exchanges in the US and Hong Kong.

In recent years, the firm has published short reports on popular stocks such as AppLovin, SoFi, and ELF Beauty.

Asset managers that dedicate a majority of their time to finding stocks to bet against are becoming somewhat of a dying breed. Industry stalwarts like Jim Chanos and Hindenburg Research founder Nate Anderson have closed their firms in recent years, and data from the industry tracker Breakout Point show that the number of activist short-sellers has dropped by more than 30% since 2020.

These firms have battled buoyant markets in addition to personal and professional attacks. Executives like Elon Musk have gone after those who have publicly bet against their companies, and a grassroots short squeeze orchestrated by Reddit retail traders wrecked Gabe Plotkin’s Melvin Capital, which eventually shuttered.

Andrew Left’s conviction of securities fraud in June, which he has said he plans to appeal, was another worrying sign for short-sellers.

“I think it’s chilling when you’re taking individuals and you’re limiting their ability to have free speech and trade with honest opinions,” Left said after the verdict.