Preparations Before Short Selling

Zhao Chen opened the folder.

Inside were several printed documents: publicly available corporate information search records, blurry screenshots of entry and exit records, and a few secretly taken photos.

The woman in the photos looked thirty-five or thirty-six, with delicate, alluring features and refined clothing. Carrying a Hermes bag, she stepped out of a black Mercedes-Benz S600.

In the background of one photo, the Henglong Group logo could vaguely be seen.

"Lin Wanqing, thirty-seven years old, a registered accountant in the United States, graduated from Columbia University Business School. She joined Henglong fourteen years ago and worked her way up from financial manager to the group's finance director."

"On the surface, her record is spotless, and her abilities are outstanding."

Zhang Qingxue's voice was like she was reading out a list of evidence.

"Yet she owns several properties, frequents luxury stores, and all her spending records show a lavish lifestyle—one that is severely inconsistent with her position and income."

Zhao Chen's gaze fell on the last document.

It was a blurry screenshot from a parent contact directory at an international school. It contained the contact information for an English name, "Linda Lin," with "Zhao Jianguo" listed as the emergency contact. The relationship field read "Father."

"She has a twelve-year-old son in the United States, attending a private school in New York. His tuition is eighty thousand US dollars a year."

Zhang Qingxue said, "The father's name field on the child's birth certificate is blank. But over the past five years, a shell company in the Virgin Islands has transferred money every year to cover the child's tuition and living expenses, totaling more than six hundred thousand US dollars."

She looked at Zhao Chen. "After three layers of nesting, the actual controller of that shell company leads to a trust account at a law firm in Hong Kong. And the settlor of that trust is your father."

The cafe was so quiet that the faint hum from the air-conditioning vent could be heard.

Zhao Chen stared at the contact directory screenshot, at the word "Father," and suddenly felt like laughing.

Twelve years old.

That meant that while he had been putting on a loving act with his mother, he had already had another woman and another child outside.

How ironic.

"Not just one."

He heard his own voice ring out calmly. "There should be two more. A girl, six years old. A boy, also six. Twins, both abroad."

Zhang Qingxue's pupils abruptly contracted. "Are you sure?"

"I will be soon."

Zhao Chen closed the folder and handed it back to Zhang Qingxue. "Please keep these documents safe. They'll be useful in the future."

Zhang Qingxue accepted the folder. Seeing the almost icy calm on Zhao Chen's face, something in her heart was viciously stabbed.

"Xiao Chen," she said softly, "if your mother knew..."

"She wouldn't have wanted me to know."

Zhao Chen cut her off. He lifted the Americano that had long gone cold and took a sip, bitterness spreading across his tongue.

"But she would want even less for me to be fooled like an idiot until the very end."

He set down the cup and looked at Zhang Qingxue. "Aunt Zhang, thank you. Not just for this."

For in this life, when he was at his most isolated and helpless, she had still chosen to stand by his side.

Zhang Qingxue shook her head. She seemed to want to say something, but in the end, she merely sighed.

"Once the funds arrive, I'll begin setting up the short-selling structure. It will take an estimated three to five business days. You'll need to control the pace of building the position..."

Zhang Qingxue took a sip of coffee and continued, "Do you have a specific plan? Price points? Position size? Are you certain about double leverage?"

Zhao Chen tore a sheet from the notebook he carried with him, picked up a pen, and quickly wrote down several figures.

"Hong Kong stocks have always given property companies low valuations. Henglong's current market capitalization is only 4.2 billion Hong Kong dollars, with its share price at roughly 10.5 Hong Kong dollars."

He wrote as he spoke.

"I calculated that the debt ratio on the company's financial report is 75%, with net assets of 6 billion Hong Kong dollars. But that isn't its true debt ratio."

"By my estimate, Henglong has at least 3 billion Hong Kong dollars in off-balance sheet liabilities that aren't reflected in its financial report. That revelation alone could drive Henglong's market cap below 3 billion Hong Kong dollars."

He did not mention that his father would go to prison.

The exposure of the true debt ratio alone would be enough to make Henglong suffer.

He pushed the slip of paper toward Zhang Qingxue. A clear short-selling plan was written on it:

Short-selling target: Henglong Holdings

Current share price: 10.5–10.8 Hong Kong dollars

Short-selling price: Build the position in batches; short as much as possible above 10 Hong Kong dollars.

Short-selling scale: Deploy 280 million Hong Kong dollars in principal, using double leverage, for a total short position of 560 million Hong Kong dollars.

Margin ratio: 50% (standard requirement for double leverage)

Target closing price: Below 7 Hong Kong dollars (a decline of more than 30%)

"Double leverage," Zhao Chen explained. "Henglong's average daily trading volume is only ten to twenty million shares, so liquidity isn't very good. If the leverage is too high, a temporary rebound in the share price could easily trigger a margin call. Double leverage is the maximum within our safety margin."

Zhang Qingxue studied the figures carefully, her mind rapidly calculating the risk parameters.

A short position of 560 million Hong Kong dollars accounted for 14% of Henglong's market capitalization. That was already a very large proportion. In the Hong Kong stock market, once it was noticed as concentrated short selling, it could easily draw attention.

"More than fifty million shares... Borrowing that many shares from the market will make it difficult not to leave a trail," she pointed out.