Now Asos is targeted as short sellers bet £ 1billion in wave of attacks on tech titans
Britain’s biggest internet companies have been targeted by stock traders in a £ 1 billion bet that their stock prices will drop.
Fashion giant Asos is the latest in the crosshairs of short sellers – who use financial contracts to borrow stocks in order to win if the stock price drops – with nearly 8% of its shares now loaned, according to a study. .
The sudden increase in the number of short positions in Asos, which has risen by a third in recent weeks, comes against a backdrop of a rout in tech stocks. Other targeted stocks include Ocado – the largest short position by value at £ 703million, or 6% of its shares – as well as Boohoo, AO World and Made.com.
In a rush: Asos faces supply issues and more returns with canceled parties
Deliveroo was also dumped by investors. Last week its shares fell below £ 1.95 – half of its issue price of £ 3.90 just nine months ago – although the size of short positions on Deliveroo is small at under 0.2%.
Tech companies around the world, including Britain’s online shopping success stories, have found favor during the pandemic. But the Wall Street Nasdaq stock index took a heavy blow last week in an investor rout that rocked the markets.
The big sale even hit stock market darlings Apple, Amazon and Tesla. Energy companies and banks have won: businesses seen as less sensitive to interest rate hikes, as the Federal Reserve cuts emergency economic aid to the United States.
This follows revelations in The Mail on Sunday last weekend that hedge funds and other traders had built record short positions in The Hut Group, which owns the LookFantastic and MyProtein brands.
THG shares then fell 10% on Tuesday, the first trading day after the weekend, and are struggling to rebound. At the end of September, the number of Asos shares loaned was less than 1%. The share price has fallen 34 percent since then.
While Asos shares have not fallen significantly in recent days, data suggests a growing number of traders believe they could fall further.
Short selling is controversial because critics say it can be used to cause the stock price to drop rapidly. But short traders and research firms are increasingly seen as an indicator that there are fundamental issues with a company’s management strategy, a company’s outlook – or that a company is overvalued for others. reasons.
In the UK, the Financial Conduct Authority publishes individual short positions the first time they have reached more than 0.5% of the company’s shares at the end of a trading day. However, since only such large positions are reported, it is difficult to determine the exact volume of short positions other than the numbers for the stocks on loan.
So while FCA data currently shows that only one hedge fund, Marshall Wace, owns 1.5% of Asos shares, financial information provider IHS says its figure of almost 8% comes from loan data provides a “close approximation” of total short sales. volumes at the end of each trading day. Sources said traders believed Asos, a favorite among fashion-conscious Britons 20 and 30, faces a squeeze despite assurances from the board in November that he could double his profit margins to long term as sales increase. He is without a CEO after Nick Beighton left with immediate effect in October, adding to the uncertainty.
Shares of rival Boohoo have also fallen – 58% since September. Last month, Boohoo cut its sales growth forecast for the year in half to February 28, 2022 and lowered its profit forecast.
The cost of materials and shipping has skyrocketed, more items have been returned than before the pandemic with holidays canceled due to Covid alerts – especially last month – and competition from the internet shop Chinese Shein is stepping up. In contrast, the fortunes of physical stores rebounded.
Tesco shares are at their highest level since before an accounting scandal in 2014, while Marks & Spencer share price has climbed to levels not seen in nearly three years. At just 0.23%, the number of M&S stocks on loan also seems to suggest that traders short sells believe its turnaround is paying off.
This week will see market updates from Marks & Spencer, Sainsbury’s, Tesco, JD Sports and Asos, among others. WH Smith, AO World, SuperGroup and Hotel Chocolat will report the following week.
Next Thursday, trading was better than expected and predicted to post record profits this year.
He said full-price sales were 20% higher during the holiday season than the comparative weeks in 2019, before the start of the pandemic.