By Harry Mottram: The trade publication Retail Gazette has listed six retailers that they say have been the target of short sellers. That inevitably has raised eyebrows in the retailing sector since the high street has gone through fundamental changes since the rise of home shopping, covid and changes in lifestyles.
Short selling is perhaps best described in the 2015 movie The Big Short with Brad Pitt, Ryan Gosling and Christian Bale in which a small group of city traders realise ahead of the 2008 Credit Crunch that the housing and banking markets are about the collapse in the USA. They buy stocks from the banks and lenders and bet against their collapse before the sub-prime mortgage scandal develops. They get paid the difference between the before and after prices by the banks – which is short selling. Short selling is effectively a sign that the traders believe a stock is over priced as that is the way they make their money.
That’s why when the Retail Gazette published the story anyone with a financial interest in the retailers mentioned need to think seriously about its potential implications. It beggars the question: could the unthinkable be about to happen?
Reporter George Iddenden wrote: “According to data from the London Stock Exchange (LSE), Asos, Boohoo, Kingfisher, Royal Mail, AO World and Naked Wines are all being targeted by short sellers and should be wary of further shifts over the coming months.
“Aggressive or excessive stock shorting is widely recognised as a way to undermine investor confidence, depress a company’s market value and make it more difficult for it to expand or raise capital.”
Iddenden explained all of the firms listed had problems – some caused by debt and some from the Covid hangover but all with falls in their market value. Short sellers are taking big risks in shorting with a lot of money and so anyone who has an interest in those firms need to take note.
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For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk