Short Stories

Dexia - short interest fell before today's news

Dexia Sa (DEXB), the world's biggest lender to local governments, was thrown a 6.4bn euro lifeline ($9.2bn) today as the widening financial crisis forced governments to prop up institutions across Europe (Source: Bloomberg.com). Shares in the bank jumped as much as 21% in Brussels trading. This comes just two days after Belgium, the Netherlands and Luxembourg agreed to inject 11.2 billion euros into Fortis (FORB), the largest Belgian financial-services company, and whom we blogged on yesterday.

As of the close of business on Friday, 8.69% of Dexia's Market Cap was out on loan (%MCOL) to short investors, down from 9.57% on September 1st, as short sellers closed their positions, potentially ahead of today's jump in share price to 7.75EUR today. Utilisation is at 76%, which means it is extremely hard and possibly expensive to borrow this stock. There are 11 Days to Cover.

Fortis - Bradford & Bingley

Fortis (FORB) was thrown an 11bn EURO (£8.8bn) lifeline last night as the Belgian, Dutch and Luxembourg governments combined to inject capital into the embattled banking and insurance group in a last-ditch effort to shore up confidence among savers (Source: FT). The group, a giant of the Belgian and Dutch financial landscape, had become the latest forcus of investor fears about the stability of the industry after ructions on Wall Street.

As you can see from the graph below which documents Fortis' Market Cap out on loan (%MCOL) to short investors, short interest has risen in the bank, but is still extremely low at 2.5%. However, Utilisation is at 49.5% which means it is fairly difficult to borrow the stock.

 Meanwhile, it was annouced today that Bradford and Bingley (BB.) will be nationalised, after negotiating a deal with Spanish bank Santander (SBP), which will buy the UK mortgage lender's £21bn deposit book and branch network for approximately £600m.

As you can see from this graph, far from being the target of short sellers, BB's short interest has actively decreased in the past month - down from 8% in August to 5.6% today. Utilisation is at 28%.

Fortis

Belgium felt the full force of the credit crunch yesterday as fevered selling gripped shares in Fortis (FORB), prompting the Belgo-Dutch bank to issue a fresh denial of market rumours about its financial position.

Fortis is among Europe’s hardest-hit casualties of the financial crisis. The bank has struggled to regain the confidence of investors in spite of announcing measures to strengthen its capital base by €8bn ($11.6bn) in June, and ousting its chief executive, Jean-Paul Votron, the following month (Source: FT.com).

Short selling has been restricted in this stock as of last week, and the bank currently has 2.45% of its Market Cap out on Loan (%MCOL), a low percentage considering Freddie Mac and Fannie Mae hit hights of 40% MCOL during the early summer.

Pubs, Retail and Property - has their short interest really risen?

There has been talk of short investors moving into the Pub, Retail and Property sector following last Thursday's ban on short selling. However, according to the data here as of close of business on Tuesday, this does not yet appear to be the case. Taylor Wimpey (TW) has 11.42% of its Market Cap out on loan (%MCOL) to short investors, down from 11.78% on Monday. Bovis' (BVS)%MCOL is down from 21.33% to 21.03%. Enterprise Inns (ETI) is down from 4.7% to 4.6%, Punch Taverns (PUB) is marginally up from 12.3% to 13.85%, Mitchells & Butlers (MAB) is down from 10.06% to 9.49%, DSG (DSGI) is marginally up from 27.53% to 28.12%, Persimmon (PSN) is down from 25.86% to 24.33%, Barratt (BDEV) is down from 14.77% to 13.18%, Kingfisher (KGF) is down from 14.2% to 13.9%, JD Wetherspoon (JDW) is marginally up from 17.35% to 17.52%, Debenhams (DEB) is down from 15.34% to 14.34%, Sainsburys (SBRY) is marginally up from 5.82% to 5.86% and HMV (HMV) is down from 32.36% to 31.27%. Take, for example this chart of Persimmon's %MCOL over the last three weeks.

LSE

As you can see from this graph of the London Stock Exchange's Market Cap out on loan (%MCOL) to short investors, short interest has continued to increase in this stock since 6 - 7th September 2008. The %MCOL was 4% then and has now risen to just under 7%. The exchange was caught out last week by the insolvency of Lehman Brothers (LEH), one of its largest clients;  it was joint venture partner and liquidity provider for the exchange's so-called "dark pool" anonymous trading facility.

Man Group

Man Group's (EMG) share price fell sharply on Monday, closing 7.8 per cent lower at 433½p as traders worried that the ban on short selling of financial stocks in the US and the UK could affect the performance of its “black box” trading strategies. Our data shows a two working day delay, so today we can see that short positions in the company have actually decreased as of close of business on Friday, as you can see from this chart of Man's Market Cap out on loan (%MCOL) to short sellers.

 

Washington Mutual

The latest data on Washington Mutual's short interest (WM) is as of close of business on Thursday, ahead of the SEC Restriction on short-selling. There was a minimal amount of short covering - from 23.99% to 22.81% between Wednesday and Thursday's trading. This chart shows the behaviour of the stock over the last three months. You can see that short positions are still reasonably high in this stock. We will give you an update on this stock and others when the data is cleared tomorrow.

HBOS

You can see from this graph documenting HBOS' Market Cap out on loan to short investors (%MCOL), that short positions were covered in the UK Bank between Tuesday and Wednesday this week, with the MCOL falling from 2.96% to 2.75% . This percentage is nowhere near the HBOS high of 10.5% MCOL in July, and to put it into context - Fannie Mae and Freddie Mac at some stages peaked to 40%.

The data appears to conflict with the views of the popular press who are suggesting a surge in short-selling. The risks inherent in being a short seller could not be more clear than in the HBOS - Lloyds TSB saw to that.

Insurers: AIG, Metlife

Insurance stocks joined banks at the forefront of a second session of heavy selling on European equities markets on Tuesday, as investors continued to worry that Lehman Brothers (LEH) might not be the only big US institution to be claimed by the current crisis, says the FT.

AIG (AIG) sparked further concern as the insurer's credit ratings were downgraded and its shares tumbled 60% in New York overnight, as regulators permitted the company to access $20bn of assets from its own subsidiaries to use as collateral for a loan in an attempt to stave off a cash crisis.

Last Friday, 5.63% of AIG's Market Cap was on loan (%MCOL) to short investors, up from 3% on August 29th. We will let you know what this figure stands at for Monday tomorrow.

Another insurer who has escaped the limelight of the global press is Metlife (MET), whose %MCOL has risen up a staggering amount from 11% on August 29th, to 25% last Friday. Utilisation is at 75%. As well as insurance, Metlife provides financial services with operations throughout the US, including life insurance, annuities, car and home insurance, and retail banking. It is therefore not surprising that this company has been noticed by short investors. Just look at this graph of MET's %MCOL over the last six months.

LEH files for bankruptcy; BofA to Buy Merrill

Unless you've been living on Mars, you will all know what is going on on this historic day on Wall Street. We are therefore here to bring you the short interest data for these troubled stocks.

Lehman (LEH), who have filed for bankruptcy, saw an enormous spike in short interest last week, presumably as short investors got wind of the possible catastrophe at the weekend. As you can see from this chart, the percentage of LEH's Market Cap on loan (%MCOL) increased from 10% to 18% between September 5th and 11th. Utilisation jumped from 35% to 63% in the same time frame.

 

There has been a general decrease in the short positions in Merrill Lynch (MER), from a %MCOL of 5% in early August to 2.6% today, although short interest has picked up from 2% on September 8th. Utilisation is at just 11% so there is plenty more left to borrow.

 

Bank of America (BAC), who are due to buy Merrill, have just 2.58% MCOL, AIG (AIG) have 4.13%, Goldman Sachs (GS) have 2.47%, and Morgan Stanley (MS) have 2.43%. The stock with the highest percentage on loan is Washington Mutual (WM), with 24.68%.