(News Bulletin 247) – News Bulletin 247 asked S&P Global Market Intelligence to compile the list of the most “shorted” stocks on the second most important index on the Paris market, namely the SBF 120. The ranking is mainly dominated by two values.

Short selling remains an extremely risky strategy and should be banned for individual investors. We explained this very well in a previous article.

As a reminder, this technique amounts to betting not on the rise but the fall of a stock. It consists of borrowing (for an agreed rent) said share from an investor who holds it and selling it immediately, counting on a drop in the price which will allow it to be bought back cheaper when returning it to its owner, pocketing so the difference.

Right now, which companies are the most targeted by short sellers? The most reliable data in this area is compiled by S&P Global Market Intelligence, the benchmark player.

At the request of News Bulletin 247, this data specialist belonging to S&P has established a ranking of the SBF 120, as during previous points in autumn 2022 and June 2023. The measurement of short selling is done via the percentage of circulating capital that is lent. Please note that this data, displayed in the infographic below, was finalized on May 27.

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Alstom, one of the “most shorted stocks in Europe”

Two actions stand out very clearly. Alstom occupies the top of this ranking with 28% of the capital lent. When contacted, the company did not wish to comment.

The figure for Alstom is still a surprise. Certainly, several financial intermediaries had highlighted that the equipment manufacturer was a stock that was very shorted by the market. After burning through more than a billion euros of cash in the first half of its past financial year, the company had to take major measures to clean up its balance sheet and protect its credit rating, which was threatened with downgrade by Moody’s. In particular, it decided to sell 700 million euros worth of assets and this week launched a capital increase of one billion euros to reduce debt.

But recent results better than expected as well as a debt reduction plan rather well received by the market have led to a clear increase in the stock in recent weeks. Alstom shares have increased by around 50% since the start of the year.

This rise in the stock suggests above all that the short sellers have probably – at least in part – already thrown in the towel and unwound their positions, judging that the worst is certainly over for the designer of the TGV.

“Alstom remains one of the most short-sold stocks in Europe and we expect the ‘short squeeze’ (the violent unwinding of ‘short’ positions, Editor’s note) to continue because the group seems to be back on track. the right path in terms of cash flow dynamics and balance sheet structure,” Deutsche Bank wrote in early May.

How can we explain in this context that such a large part of Alstom shares are still loaned and therefore potentially sold short? According to a close source, the response would be linked to the capital increase announced by the group.

Systematically, when a listed company makes a call to the market, the share of securities lent increases significantly, because speculative funds borrow shares while they study their arbitrages while this increase takes place, she argues. According to this source, the share of Alstom’s capital lent in “normal” times would be around 5% to 10%.

Atos in the midst of a stock market slump

In second position is Atos. The digital services company has been experiencing a real stock market nightmare for several years, due to strategic shifts, managerial instability, and a significant outflow of cash. The stock has plunged 72% since the start of the year and 85% over one year.

The group is currently seeking 1.7 billion euros in funds in various forms (cash, credit lines, guarantees) to ensure its survival and has been the subject of several takeover offers. The company indicated that, in any case, its recapitalization will result in “massive” dilution of its shareholders. Which may explain why investors tend to position themselves for a fall in the stock.

The other companies present in the top 10 display more “ordinary” levels of securities lent. Carrefour (12.7%) is third ahead of Air France-KLM (10.04%), a very volatile stock on the stock market and which can therefore attract short sellers.

Vusiongroup, which was recently the subject of accusations of accounting irregularities by the Shadowfall fund, a year after having suffered a similar offensive from Gotham City Research, is in fifth place. Shadowfall’s accusations, saying the tweet “sowed” confusion and aimed to “reopen the closed chapter” of the attack on Gotham City Research, which had been completely refuted by the company.

Contacted by News Bulletin 247 regarding the share of its capital lent, Vusiongroup declared that “its place in this ranking (was) due solely to its strong visibility on the stock market: over the last five years, the group has shown the strongest increase of the stock price (+612%) and the strongest growth in turnover (+230%) of the SBF 120″.

“When Vusiongroup was subjected to attempts at manipulation and destabilization by short sellers who seek to deceive investors, we systematically denounced them. Each attack carried out by shorters was the subject of precise and transparent responses” , added the company. Its general director, Thierry Gadou, called for “a better evaluation” of short-selling funds, “which harm shareholders but also real activist funds which intervene, in the long term, for the common good”, also underlines the society.

Weighed down by an unprecedented real estate crisis which led it to launch a job protection plan and to renounce the dividend, Nexity is sixth.

Teleperformance follows in seventh place. The action of the outsourced customer relations specialist has suffered in recent quarters from fears of an upheaval in its activity caused by artificial intelligence. Management and several analysts, however, minimized or put these fears into perspective and the group published activity for the first three months of 2024 which reassured the market.

The “high level of securities loaned (from Teleperformance, Editor’s note) can be explained by the dividend paid on May 29”, argues a source close to the company. “Investors were able to position themselves and borrow the securities,” continues this same source, who expects “the borrowed share to decline now that the dividend has been paid.”

Note, moreover, that BNP Paribas and Société Générale follow each other in the ranking, in eighth and ninth places, respectively.

Vallourec completes the top 10. “Around three quarters of short sales are made by holders of BSA (share subscription warrants)”, which had been allocated to banks during the 2021 financial restructuring, the company said at News Bulletin 247.

“These BSAs have an exercise price of 10.11 euros which, at Vallourec’s current price (16.25 euros at Thursday’s close), places them in a situation of strong capital gains. Consequently, a very A large part of the short sales were carried out by holders of BSAs who seek to protect their capital gains by selling shares short, but are not linked to a negative opinion on the Vallourec group or its financial outlook. , the company continued.

Contacted by News Bulletin 247, Société Générale and Air France-KLM did not comment. BNP Paribas, Carrefour, Nexity and Atos did not immediately respond to requests for comment.