Short-sellers are targeting grocer Sainsbury’s amid fears that Dave Lewis, the new boss of rival Tesco, will reset margins when he arrives.
Since Lewis was unveiled as the new chief executive of Tesco, the proportion of Sainsbury’s shares out on loan has risen and is approaching levels not seen since July 2006, when financial data group Markit began compiling its data, reported The Telegraph.
Some 10.5% of Sainsbury’s shares have been borrowed, up from 9.3% on the day Lewis was revealed as Philip Clarke’s replacement, making it the most shorted stock in the FTSE 100.
Exane BNP Paribas analyst Andrew Gwynn told the newspaper: “The fear is that incoming CEOs of food retailers often reset margins and clearly there is a knock-on effect for everyone in the market.
“The reason why people jump on Sainsbury’s is that its balance sheet and operational free cashflow used to be the weakest.”
Short-sellers profit from falling share prices by borrowing stock and then selling it, in the hope that they will be able to buy it back at a lower price and pocket the difference.
Hedge funds including Lansdowne Partners and Odey Asset Management are betting against Sainsbury’s, which has suffered a 6.9% fall in its share price since Lewis’ appointment.
Morrisons shares on loan have also crept up from 7.2% to 7.6% over the same period.