Activist Shorts Effective in Germany in 2020
by Breakout Point, on Sep 22, 2020 3:30:00 PM
Last week's report on the German company Grenke, published by Viceroy Research, was the fourth major new short campaign aimed at German companies in 2020. Shares lost as much as 56%, but have since recovered somewhat. This seemed like a good occasion to look at our records and see how really successful the activist short sellers in Germany have been this year.(*)
Activists 4 : Germany 0?
Our analysis took into account new activist short campaigns initiated in 2020 and therefore does not even take into account the collapse of Wirecard. We recorded four such short campaigns in Germany this year. For comparison, we examined all countries that had more than one new short report in 2020. The results look rather worrying for Germany. No other country even comes close to Germany in terms of the associated price declines.
Interestingly, four new major short reports came from four different short activists, with only Viceroy having a global reputation. Also, companies from different sectors were targeted. In the mix there is a battery manufacturer, a technology service company, a leasing company and an investment company.
Regulator, media and hedge funds
As is often the case, an interesting dynamic developed after the first short report from Viceroy. This included: several detailed company responses, follow-up reports from the short sellers, the involvement of the regulatory authority, the reactions of the investment managers and media coverage. Considering that this is only the second major short report after the collapse of Wirecard, and given the rather unusual reactions of BaFin and some parts of the German media, it was interesting to observe their reactions in this case.
BaFin, the German financial regulatory authority announced an investigation of the company. However, the German regulator also mentioned that it would investigate if there was a potential market manipulation related to short selling activities. Overall, the whole country seems to have a somewhat softer approach to short selling since Wirecard-case. The media was seemingly not rushing to support Grenke, but has published rather neutral coverage of the events, as also elaborated in this commentary in Handelsblatt.
At the investment managers side, one well-known European fund manager sold entirety of their Grenke stake following Viceroy's report. Interestingly, the media reported that the same fund manager was previously "forced to apologise to investors for holding a large stake in German payments processor Wirecard."
There were also some big winners among investment managers who were able to benefit from Grenke declines. Based on our data records, we estimated that the three largest holders of short positions, BlackRock, Gladstone and Odey, together were up as much as 48 million euros on their big Grenke shorts.
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* Note: Unless otherwise stated, presented data and analytics is as of available on 2020-09-19-12:00h UTC.
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