Sunday, 5 October 2008

Short positions

The Observer has an extra section today focusing on the credit crunch. It's actually not very informative. Will Hutton's piece in it (which doesn't seem to be on the website) is worth a read.

The business section does has one interesting story in it about the shorting in respect of a number of companies (as indentified by level of stock-lending). Here's what it says -

According to figures from City research firm Data Explorers, 18.28 per cent of Wetherspoon's shares are on loan, nearly as much as Northern Rock's (20 per cent) at the time it became the first UK victim of the credit crunch last year. The proportion of Punch's shares on loan stands at nearly 17 per cent.

Mitchells & Butlers, another pub company, has 9.35 per cent of its shares on loan, while retailer Debenhams has 12.7 per cent, says Data Explorers.

Debenhams is the interesting one for me, as it has become one of the examples people like to give of a bad private-equity buyout (take private, load up with debt, refloat). So perhaps not surprising to see market sentiment being pretty negative about it.

3 comments:

zedman said...

The data quoted in the article and repeated in your post needs a context. By aligning the short volume of Wetherspoon with that of Northern Rock, it would be easy for a reader to think that this means Wetherspoon's might soon be up for nationalisation as well.
However, the reality shows that through August and for the first couple of weeks of September, the amount of stock on loan was much higher than the most recent data shows, peaking at almost 29%.
There are a number of reasons why shorting decreases when a stock price drops. I have written a layman's guide in the following post: http://securitieslending.typepad.com/my_weblog/2008/10/short-sellers-like-rising-markets---huh.html

Tom P said...

cheers Zedman - mind if I give it a plug?

zedman said...

I'd be honoured ...