How much is a good story worth? One-hundred million dollars? That’s the bet being placed by the investors backing a start-up, Hunterbrook, that makes trades based on the market-moving reporting from its affiliated newsroom. It seeks to revive the classic tenets of journalism — accurate articles, foreign coverage, and investigative reporting — in a field critics say is dying.

Hunterbrook includes a trading group that gets exclusive first access to the articles produced independently by its press arm. To mitigate the risk of scrutiny by the Securities and Exchange Commission, those articles are made using publicly available information and open-source data, as opposed to insider information. There’s no paywall or advertising. Fees from the hedge fund subsidize the reporting.

Hunterbrook is the latest push to try to incentivize quality journalism as the industry bleeds readers and struggles with layoffs. Investigative journalism, for one, is tough for modern newsrooms to sustain. It takes time and costs more than short, click-bait-type articles that clog up much of social media feeds these days. Hunterbrook is betting big on the belief itself that readers are dissatisfied and yearning for more.

“We’re not claiming to be traditional journalism,” Hunterbrook’s chief executive, Nathaniel Horwitz, tells the Sun, “but we’re absolutely seeking to fill some of the gaps that have been left by the decline of traditional media. We seek to drive visibility in increasingly under-covered areas and accountability in increasingly under-scrutinized sectors.”

Hunterbrook last week released its first investigation, which argued that America’s largest mortgage lender, United Wholesale Mortgage, had unfairly captured the business of independent mortgage brokers. The report disclosed that Hunterbrook took a short position on the company and a long position on its direct competitor, Rocket Mortgage. UWM’s stock fell 8.5 percent that day, but so did the stock of Rocket Mortgage.

Asked by the Sun for a comment on the investigation, UWM pointed to its recent statement asserting that Hunterbrook “manufactured” the article to contain “numerous lies.” UWM says it’s common for brokers to send most of their business to a particular lender, and points to its successes with the years of lawsuits by its competitors. “We are 100% confident nothing needs to change or will change because of Hunterbrook’s disinformation.”

Hunterbrook is likely to get a close look from the SEC. If the firm publishes false information or fails to disclose its financial interests, it could be charged with market manipulation. If it obtains material nonpublic information that drives its trade, that could run afoul of the anti-fraud provision the Securities Exchange Act of 1934. 

This provision, section 10(b), prohibits the use of “any manipulative or deceptive device or contrivance in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.”

The Investment Advisers Act of 1940, though, does not consider the publisher of “any bona fide” newspaper or other kind of publication an “investment adviser.” So they are exempt from the requirement of disclosing any compensation or support they are receiving with respect to the information they are publishing. 

First Amendment issues could potentially arise if the SEC were to scrutinize the firm on those grounds, a senior fellow in economic policy at the Heritage Foundation, David Burton, tells the Sun. 

“The SEC is capable of being overly aggressive and paying limited attention to what the statutes say,” Mr. Burton, who recently testified on this issue before the House Financial Services Committee, says. “I have no trouble with them being aggressive against fraudsters. The problem is that in a number of important areas, they’re stretching the law beyond all recognition.”

To protect against potential securities fraud, Mr. Horwitz and his co-founder and publisher, Sam Koppelman, have hired as their general counsel a former SEC lawyer, Fitzann Reid. Mr. Horwitz says that there is a wall of compliance dividing Hunterbrook Media from Hunterbrook Capital. The firm’s traders, he says, have no input on the timing nor the content of the articles published by its journalists.

“Every investment firm that trades stocks is trying to learn as much as they can in their investment thesis without getting insider info,”  Mr. Horwitz says. “Hunterbrook Capital is no different. The only addition is that Hunterbrook Media publishes the articles it provided to Capital after legal and compliance review. That’s in the form of high-quality reporting written by a team that’s independent from the traders.”

Other investment firms like Hindenburg Research and Muddy Waters have found success in both investigating and taking financial positions in companies. If Hunterbrook can find good, market-moving stories, the money will likely follow.

Seed investors included Laurene Powell Jobs of Emerson Collective; General Catalyst’s co-founder, David Fialkow; Marc Lasry of Avenue Capital; and Outside the Box Investments, which has as an advisor a former Wall Street Journal editor, Matt Murray, who also advises Hunterbrook.

“I believe that good reporting can be a good business,” Mr. Horwitz says. “Reporting provides an exceptional value to society. The only people who have not been capturing the value are the teams and the outlets that produce it.”