Chapter Summaries

Carson Block acknowledged on CNBC that Muddy Waters had wrongly judged Era Vanguard’s funding to pose a compliance risk, after reviewing the records disclosed to the SEC. The interview strengthened Era Vanguard’s public standing, while an old man at the Explorers Club watched the fallout in silence.

• Morgan Brennan interviewed Carson Block about the SEC’s dismissal of Muddy Waters’ complaint against Era Vanguard.
• Carson Block admitted his team had underestimated the transparency of Era Vanguard’s funding and said their earlier conclusion was wrong.
• Carson Block said he had verified the fund’s transaction records page by page and praised their completeness.
• CNBC published clips highlighting Carson Block’s admission, and analysts said the SEC investigation had bolstered Era Vanguard’s credibility.
• An old man at the Explorers Club read the interview transcript, said Bullock had bowed to the account statements, and switched off his tablet.

Andrew Left stayed silent as Citron Capital quietly covered its Tesla short positions after the SEC closed its case into Era Vanguard. Zhao Chen watched the short-selling alliance retreat, but remained wary of Carson Block’s hint that something had been held in reserve.

• Andrew Left ignored reporters and left his May accusations against Era Vanguard online while Citron-linked accounts steadily bought back Tesla shares and closed put options.
• Other major Tesla short sellers also began covering their positions, and CNBC and other outlets reported that the short-selling camp was retreating.
• Zhao Chen watched CNBC’s analysis and received Chen Xi’s message that Citron had most likely started closing its positions.
• Zhao Chen felt no triumph and continued considering Carson Block’s warning, as well as Nvidia and Tesla’s year-end delivery figures.

At the Explorers Club, the remaining short sellers reviewed how their campaign against Era Vanguard had collapsed after the SEC dropped its investigation and Tesla recovered. The gray-haired old man declared the trade over, while the group realized Era Vanguard had kept every Nvidia position.

• The gray-haired old man gathered with the remaining short sellers and noted that several former allies had left after taking losses.
• An analyst reported that at least a dozen major shorts had exited since June and fewer than half of the May alliance still held positions.
• The gray-haired old man recounted the short campaign against Era Vanguard and its recovery after it supplied verifiable transaction records to the SEC.
• The group acknowledged that Tesla had stabilized near $300, Nvidia was near its yearly high, and the SEC had closed its investigation.
• The bald man pointed out that Era Vanguard had not sold any Nvidia shares, and the gray-haired old man declared the trade over.

Zhao Chen and his team watched Tesla’s Q2 2019 report beat delivery expectations while maintaining automotive gross margin, driving its after-hours share price higher. Zhao directed the team to prepare a Henglong Capital business update as the report weakened the short sellers’ case.

• Zhao Chen, Su Wantang, Chen Xi, and Zhang Qingxue waited in New York for Tesla’s quarterly results, with analysts expecting 91,000 deliveries.
• Chen Xi read Tesla’s results: revenue was $6.35 billion, automotive gross margin was 18.9%, and deliveries reached a record 95,200 vehicles.
• Chen Xi confirmed that automotive gross margin exceeded expectations and had held up despite price cuts, while Tesla’s after-hours stock climbed above $272.
• Chen Xi compared the results with the short sellers’ forecasts and concluded that their main arguments had been undermined.
• Zhao Chen predicted short covering and momentum buying, then told Zhang Qingxue to have Liu Mingyu prepare a Hong Kong Stock Exchange update about Henglong Capital’s investment rationale.

Zhao Chen and Chen Xi watched Tesla surge after its earnings, forcing short sellers to cover as momentum buyers piled in. Tesla closed at US$285 after reaching US$291, and Zhao Chen said the climb toward a trillion-dollar valuation had only begun.

• Chen Xi tracked heavy after-hours buying as Tesla rose from US$264 to US$274, and Zhao Chen predicted short covering and momentum buying would drive the next session higher.
• Liu Mingyu drafted Henglong Group’s business update announcement about its new-energy investments and asked Zhao Chen whether to prepare an unusual share-price announcement.
• Tesla opened at US$275 and quickly climbed above US$280 as Chen Xi identified short sellers’ covering orders.
• Zhao Chen predicted Tesla would break the shorts’ stop-loss levels, and the share price rose past US$290 as hedge funds bought to close their positions.
• Tesla closed at US$285 after reaching an intraday high of US$291, and Zhao Chen said a trillion-dollar Tesla was still ahead.

Tesla’s rally forced major short sellers to cover their positions, ending the gray-haired old man’s long campaign at a heavy loss. As Henglong prepared to announce its growing role in the new energy sector, Zhao Chen turned his attention to Nvidia.

• On July 25, Tesla’s volatile trading widened institutional short sellers’ margin shortfalls, and the gray-haired old man ordered his trading desk to close everything the next day.
• On July 26, Tesla surged to about $295 as short sellers rushed to cover, and the gray-haired old man closed his final positions around $289 and recorded his loss.
• Bloomberg and a Zhongxin Construction and Investment analyst attributed Tesla’s rally from $178 to $295 largely to a short-covering stampede after the SEC closed its case involving Era Vanguard.
• Zhao Chen told Liu Mingyu to prepare Henglong’s unusual price movement notice and include an update that Henglong Capital’s new energy investment thesis was taking shape.
• After discussing the short sellers’ forced retreat with Chen Xi, Zhao Chen looked toward the Hudson River and said Nvidia was next.

The White-Haired Old Man reviewed his failed short campaign against Era Vanguard and recognized that his greed and underestimation of Zhao Chen had led to a major loss. He declared the campaign over and gave his Black Notebook to the bald man as a warning for the others.

• The White-Haired Old Man reread the liquidation report and reflected on the profits he had failed to secure as Tesla rebounded.
• The White-Haired Old Man reviewed his Black Notebook, tracing Era Vanguard’s growing stake, the short sellers’ campaign, and Zhao Chen’s Bitcoin trading history.
• The White-Haired Old Man wrote that his group had misjudged Zhao Chen, who had anticipated their reasoning about his leverage.
• The bald man and two other remaining allies joined the White-Haired Old Man, who declared the campaign over and blamed their defeat on their own arrogance.
• The White-Haired Old Man handed the Black Notebook to the bald man and told the group to consult it before using high leverage against an opponent they did not understand.

Zhao Chen and the Era Vanguard team reviewed the short sellers’ losses after closing their Tesla short positions and reaffirmed their long-term holdings in Tesla and Nvidia. The chapter ended with Era Vanguard’s investments supporting Henglong’s rising value and its reputation for creditworthiness.

• Chen Xi showed Zhao Chen that Era Vanguard’s Tesla short position had fallen to nearly zero and was fully closed after July 29.
• Shen Zhiyi asked about the short sellers’ losses, and Chen Xi estimated that several liquidated funds had lost more than five billion US dollars combined.
• Zhao Chen explained that short sellers’ arrogance and failure to cut their losses had turned their Tesla positions into heavy losses.
• Zhao Chen said Era Vanguard would hold its approximately 26 million Tesla shares and 94.1 million Nvidia shares as long-term strategic investments without adding or reducing them.
• Zhang Qingxue and Chen Xi reported that Bidiya’s share price had risen to around 56 yuan and Henglong’s market capitalization had exceeded HK$67 billion.
• Zhao Chen said the short sellers had supplied Era Vanguard with cheap Tesla shares and tested the fund’s resilience in global capital markets.

Zhao Chen decided that Era Vanguard would stop buying Tesla shares and hold its 26 million shares as a long-term strategic investment. After Musk thanked him for honoring their agreement, Era Vanguard filed an amendment publicly ruling out seeking control or interfering in Tesla’s operations.

• Chen Xi asked Zhao Chen whether Era Vanguard should buy more Tesla shares after the price rose above $300, and Zhao Chen refused, reaffirming the 26-million-share limit and long-term strategy.
• Zhao Chen and Musk exchanged texts thanking each other for their trust and agreeing to their respective roles as shareholder and CEO.
• Lin Shicheng filed Era Vanguard’s Schedule 13D amendment, declaring its 26 million Tesla shares a long-term holding and stating that it would not seek control, a board seat, or influence over daily operations.
• Bloomberg and Reuters reported on the filing, and Chen Xi told Zhao Chen that commentators called it a textbook long-term shareholder declaration.
• Zhao Chen dismissed the commentary and returned to reviewing the green energy technology mass-production progress report.

Chen Xi and Zhao Chen listened to Nvidia's second-quarter earnings call, where Huang Renxun described AI demand as the beginning of a structural trend. Zhao Chen decided to keep Era Vanguard's Nvidia holdings unchanged, leaving Chen Xi's memo to record the call as a potential turning point.

• Chen Xi reviewed Nvidia's earnings report and noted that data center revenue had returned to quarter-over-quarter growth.
• Huang Renxun said that demand for AI training and inference was accelerating and called it the start of a structural trend.
• Chen Xi recorded Huang Renxun's remarks while Zhao Chen watched Nvidia's share price rise modestly after the call.
• Zhao Chen said Era Vanguard would keep its Nvidia position unless Huang Renxun left Nvidia or AI proved to be a bubble.
• Chen Xi completed a memo of the call and Zhao Chen's decision, marking the date as a possible turning point.

Zhao Chen decided that Era Vanguard would convert its Nvidia stake into a permanent strategic holding, and Lin Shicheng prepared the legal and compliance changes to support the decision. The chapter ended with Zhao Chen looking ahead to a decade of AI growth and planning a future filing tied to Nvidia’s data center business.

• Zhao Chen told Lin Shicheng and Chen Xi that Era Vanguard would lock in its 94.1 million Nvidia shares as a long-term strategic allocation.
• Lin Shicheng clarified that the position would not be sold unless Huang Renxun left Nvidia or AI was shown to be a bubble, and Zhao Chen tasked him with ensuring the decision remained compliant.
• Lin Shicheng planned to amend the Schedule 13D, revise the internal compliance manual, and prepare a memorandum documenting the holding decision and its two reduction conditions.
• Chen Xi reviewed Era Vanguard’s Nvidia position records, which showed a roughly $13.66 billion investment and an unrealized gain of about $900 million.
• Zhao Chen said a future filing would promise to maintain Era Vanguard’s ownership percentage until data centers became Nvidia’s largest revenue source.

Lin Shicheng and Chen Xi discussed the risks and reasoning behind Zhao Chen’s decision to hold Era Vanguard’s massive Nvidia position long term. They agreed to describe the position as permanent core assets in the filing while explicitly acknowledging the risks of concentrated investment.

• Chen Xi asked Lin Shicheng whether his concern about Zhao Chen locking up the Nvidia position was genuine or simply part of his risk-management duties.
• Lin Shicheng explained that Zhao Chen had long aimed to claim a lasting stake in Nvidia, guided by his belief in the AI computing-power industry rather than stock-price fluctuations.
• Chen Xi questioned the limits of Zhao Chen’s concentrated investments in Nvidia and Tesla, and Lin Shicheng warned that Zhao Chen’s confidence in his own investment thesis could make him overlook contrary signals.
• Lin Shicheng said Zhao Chen’s conditions for selling—Huang Renxun leaving Nvidia or AI being proven a bubble—were subjective, and he and Chen Xi discussed how difficult those triggers might be to assess.
• Chen Xi proposed describing Nvidia as a long-term permanent core asset in Era Vanguard’s Schedule 13D amendment, and Lin Shicheng added a sentence acknowledging the consequences of volatility from the concentrated allocation.

Lin Shicheng warned Zhao Chen that Era Vanguard’s concentrated holdings in Nvidia and Tesla exposed it to severe losses if their underlying industries changed. Zhao Chen defended his investment strategy as confidence in industry fundamentals, and Lin agreed to complete the lockup documents.

• Lin Shicheng told Zhao Chen that Era Vanguard had invested most of its assets in Nvidia and Tesla and warned that those concentrated holdings could suffer sharply if AI or the companies’ prospects changed.
• Zhao Chen argued that his investments rested on confidence in the long-term fundamentals of AI computing and new energy, not on short-term share prices.
• Lin Shicheng asked whether Zhao Chen viewed risk management as understanding industry trends rather than diversifying, and Zhao Chen agreed.
• Lin Shicheng said Zhao Chen’s confidence came from detailed research and verification, not luck or gambling.
• Lin Shicheng said he would finish signing the lockup documents that day, then left Zhao Chen’s suite.

After Era Vanguard filed a Schedule 13D amendment declaring its Tesla holdings a permanent strategic allocation, Zhao Chen spoke with Elon Musk about their trust and shared boundaries. Musk publicly backed the long-term value of Tesla, and Zhao promised to see their bet through to the end.

• Zhao Chen reviewed the Schedule 13D amendment, which stated that Era Vanguard intended to keep its Tesla holdings as permanent core assets.
• Zhao Chen texted Elon Musk that Era Vanguard would not buy more shares, sell down, or trade swings unless Musk left Tesla or new energy proved unviable.
• Elon Musk called Zhao Chen and praised Era Vanguard for supporting Tesla without offering unwanted advice or seeking control.
• Elon Musk said he would tell Bloomberg that Era Vanguard's lockup made him more certain Tesla was worth holding for the long term.
• Zhao Chen and Elon Musk recalled their conversation at Boca Chica, and Zhao vowed that Era Vanguard would see the bet through to the end.

Zhao Chen established Era Vanguard’s dual-track strategy, focusing on AI computing power and new energy, and assigned the team’s research and compliance responsibilities. He delegated routine investment and compliance decisions to Chen Xi and Lin Shicheng, leaving himself to oversee major strategic changes, large fund transfers, and team restructuring.

• Zhao Chen set Era Vanguard’s strategy around AI computing power and new energy, excluding unrelated sectors.
• Zhao Chen designated Nvidia as a permanent core holding and Tesla as a long-term holding that required continued industry and competition research.
• Zhao Chen assigned Chen Xi to lead research across AI and new energy and authorized her to hire three researchers.
• Zhao Chen put Era Vanguard’s and the wider group’s cross-border compliance work under Lin Shicheng, while confirming Su Wantang and Shen Zhiyi’s separate responsibilities at Henglong.
• Zhao Chen gave Chen Xi final approval on routine investment decisions and Lin Shicheng final approval on compliance, reserving major strategic decisions, large fund transfers, and team changes for himself.

The White-Haired Old Man wrote an annual letter admitting that his Tesla short-selling losses came from his own errors and that Era Vanguard had outperformed him. He decided to close his fund and return its remaining assets to investors, then destroyed his Black Notebook.

• After Era Vanguard and Henglong began implementing the new framework, the White-Haired Old Man reviewed his liquidation report and trading records before writing to his investors.
• He explained that his fund had shorted Tesla in response to Era Vanguard’s Nvidia position and admitted that he had underestimated Zhao Chen’s funding, compliance preparation, and resolve.
• He accepted personal responsibility for failing to take profits and continuing to short Tesla as its price rebounded.
• He signed the letter and instructed the trading desk to send it to all limited partners, announce the fund’s closure, and return the remaining assets.
• He fed the Black Notebook into the office shredder and left his office.

Bloomberg aired a special examining how Zhao Chen and Era Vanguard defeated the short-seller alliance, highlighting Zhao Chen’s strategic patience and strict compliance. The program ended by framing the alliance’s defeat as a consequence of its own misjudgment and Zhao Chen’s unwavering certainty.

• Bloomberg’s producers approved a prime-time special about Zhao Chen after the White-Haired Old Man’s letter circulated on Wall Street.
• Morgan Brennan introduced the battle between the short-seller alliance and Era Vanguard, emphasizing Zhao Chen’s youth and the fund’s short history.
• A veteran fund manager described Zhao Chen’s investments in Bitcoin, Tesla, and Nvidia as stages in a larger game of chess.
• A former SEC official praised Era Vanguard’s compliance discipline and detailed financial records.
• A veteran financial journalist said Zhao Chen had kept Henglong Group’s domestic investments separate from Era Vanguard’s offshore operations and followed disclosure rules.
• The veteran fund manager called the letter the short-seller alliance’s epitaph and said the alliance had been beaten by Zhao Chen’s certainty.

Domestic financial media and investors examined Zhao Chen’s rise and trading methods, prompting him to archive their analysis for future strategy reviews. At an industry forum, he defended Era Vanguard’s long-term lockup as a way to preserve freedom rather than exert control.

• Caijing published an investigation tracing Zhao Chen’s rise from Shan City to Wall Street and his investment decisions across three markets.
• Wall Street News circulated an infographic of Zhao Chen’s career, while domestic investors and a Hong Kong hedge fund founder discussed his strategy, preparation, and execution methods.
• Zhao Chen told Chen Xi to archive the reports and comments for internal strategy reviews, and Chen Xi saved them under September 6, 2019.
• At a domestic industry forum, a manufacturing group’s strategic adviser asked whether Zhao Chen’s promise not to seek control was genuine or a subtler form of control.
• Zhao Chen said the long-term lockup freed company management from fearing a sudden sale and preserved both their freedom and his.

Liu Mingyu reviewed analyst reports arguing that Henglong Group’s hidden assets were undervalued as its shares climbed, while Shen Jue and Song Zhongping discussed how Zhao Zong’s disciplined actions had shaped the market’s confidence in the company. The chapter left Henglong’s rising valuation tied not only to its assets, but also to investors’ belief that Zhao Zong would keep delivering.

• Liu Mingyu studied a report that raised Henglong Group’s target price to HK$110 by citing the undervaluation of its stakes in Bubble Mary, Green Energy Technology, and Yunnan Agriculture Group.
• Liu Mingyu noted that changing how the market priced Henglong’s business could matter more than revaluing its assets.
• Henglong Group’s share price rose from HK$90 to HK$91.5 as institutional investors steadily bought shares.
• Shen Jue told Song Zhongping that Zhao Zong had released his pledged Henglong shares before they could endanger the company, then used his investment gains to support it.
• Song Zhongping and Shen Jue concluded that Henglong’s premium reflected the market’s belief in Zhao Zong’s continued credibility.

Shen Jue concluded that Henglong’s rising share price reflected a premium on Zhao Chen’s credibility, not merely the company’s assets or performance. A Bloomberg report confirmed that investors were pricing in that credibility as the share price broke HK$95.

• Shen Jue revisited Henglong’s research report and realized Zhao Chen’s credibility explained a value the financial models did not capture.
• Shen Jue told the board’s WeChat group that institutional investors were buying a premium on Zhao Chen’s credibility as Henglong’s shares rose.
• Xu Yong connected key milestones in Zhao Chen’s record to successive increases in Henglong’s share-price premium.
• Sun Zhengping argued that Zhao Chen’s credibility came from accepting penalties and making amends to a higher standard.
• Liu Mingyu shared a Bloomberg alert reporting that Henglong had crossed HK$95 and that the market’s premium on Zhao Chen’s credibility benefited shareholders.