Sunday, 8 December 2019

Shorting and voting

As some people will be aware, I've been looking into changes in voting turnout at companies in trouble. Short version: turnout has fallen at several such companies, in some cases significantly. Why this might be is another question. Since several of these companies were also been heavily shorted there's a potential explanation. Perhaps investors lending shares to those shorting were not recalling them in order to vote.

So I've had a look at public shorting data (which I know is limited) and plotted this against turnout. The charts below are v basic. I've just looked at the short position on (or shortly prior to) the date of the relevant meeting. Really I ought to put more shorting data in, as obvs the shares don't get lent out and shorted immediately before meetings.

Anyway, it looks like there is a bit of a correlation, although the Debenhams example does not show that at all. So it's possible that something else is going. Perhaps changes in the register explain it - as companies get into trouble big institutions who are more likely to vote are no longer there in numbers. Or perhaps some investors just give up - if you're an indexer who has to hold the shares, but know the company is doomed why vote? Why not at least get a bit of lending income? So not a straightforward story.

PS - Premier Oil obvs not in the same category as the others. I included it as the story about the massive short in the company is in the press today.

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