The Zhitong Finance App learned that Carson Bullock, founder of the well-known shorting agency Muddy Waters (Muddy Waters), was bearish on Nidec (Nidec) ten years ago. He said that the scandal that now looms over the motor manufacturer shows that Japan's corporate reforms are far from enough.
“There are quite a few problematic companies, and in this market, people aren't really being held to account.” In an online interview, Bullock said, “There is a serious failure in the market, and aggressive shorters and the media need to improve transparency.”
Almost no one paid attention to the shorting report ten years ago
Since last year, Nidec has been mired in an accounting scandal and faced the risk of being delisted from the Tokyo Stock Exchange due to failure to obtain an auditor's opinion on its financial statements. Investigations revealed widespread fraud in some of Nidec's subsidiaries, and almost ten years have passed since Muddy Water Capital, a hedge fund owned by Bullock, pointed out its “aggressive” accounting treatment, “suspicious” transactions, and corporate governance issues in its 2016 shorting report.
Bullock said that the market has long ignored Nidec's problems, highlighting the “collective silence” surrounding the company and the wider Japanese business community. He also said that the Muddy Waters report was almost unheeded at the time, and the fund closed its positions soon after shorting.
A Nidec representative declined to comment.
Nidec writes down $4 billion; scope of investigation questioned
Bullock anticipates that Nidec's accounting irregularities will also have more subsequent effects. He said that the company's investigation into its own actions did not fully cover the period before and after the Muddy Waters Report was released.
Nidec recently deducted 632 billion yen (US$4 billion) for the fiscal year ending March 31. Previously, the results of a third-party survey were announced. The survey officially covered the first quarter of fiscal year 2020 to fiscal year 2025. Nidec said in a statement that the investigation also examined “an earlier period where it was deemed necessary to analyze the reasons, etc.”
“The investigation clearly missed a number of problematic years.” Bullock said, “I think people can't help but wonder if the extent of Nidec's problem is fully understood at present.”
Japan's reforms are still insufficient, and it is difficult for shorters to get a response from the market
So-called aggressive short sellers like Muddy Waters profit by exposing the company's problems and betting on falling stock prices. Bullock said that although Japan has implemented corporate governance reforms aimed at improving efficiency over the years, Japan still “has a lot of work to do” for aggressive short sellers.
He said that some Japanese companies lacked transparency, which provided an opportunity to uncover misconduct. However, Bullock added that the “no trouble” corporate culture followed by Japanese companies makes it difficult for shorters to gain attention in the market. “I have very low confidence that shorting will pay off,” he said.
Since shorting biopharmaceutical company PeptiDream in 2019, Muddy Waters has not released any shorting reports against Japanese companies. Bullock said the fund is currently not planning to bet on stocks in Japan, but is considering buying credit default swaps (CDS) from Japanese companies because the company is increasing borrowing to invest in artificial intelligence. Texas-based Muddy Waters manages around $576 million in assets, according to the US Securities and Exchange Commission's March filing.
Since the Tokyo Stock Exchange added Nidec shares to the special warning list in October 2025, Nidec's stock price has fallen by more than 30%, and the current trading price is close to its lowest level in ten years.