Investors in Ireland’s leading stocks will be able to gauge real demand for their shares more accurately from the end of this month when figures on short-selling will be published for the first time.
CrestCo, the company that electronically settles the vast majority of trades in Dublin-listed stocks, will shine a light on the darker side of share investing when it begins publishing daily figures on the number of shares on loan to short-sellers in the market’s biggest companies.
Activity rather than market capitalisation will be the determining factor. That should mean clarity on activity in the likes of AIB, Bank of Ireland, CRH, Ryanair and Anglo Irish Bank in normal circumstances.
Other large companies, such as Elan or Independent News & Media, might come into the frame at times of heightened interest in their stock.
However, only trade through CrestCo will be taken into account, ruling out US dealings, which account for a large proportion of the activity in stocks such as Elan.
From September 29th, the company will also publish such data for the top 350 shares on the London Stock Exchange.
Typically, short-sellers borrow shares from an investor for a fee and sell them in the belief they are overvalued and likely to fall. The short-seller, often a hedge fund, then buys them back at a lower price, returns the shares and pockets a profit.
CrestCo business development manager Mr Jason Waight said the data would be released daily but would be a week old, so that figures released on a Monday morning would show the number of shares on loan as of the previous Monday’s close.
Mr Waight said short-sellers preferred to release the data with a delay so as not to telegraph their investment strategies. The lenders and borrowers of shares will also be kept anonymous.
“It [real-time disclosure] has been discussed but it was not hugely popular with the borrowing community,” Mr Waight said.
Britain’s financial watchdog, the Financial Services Authority, called for disclosure on short-selling in April after some traditional fund managers accused hedge funds of driving down the market, forcing big investors like insurers to also sell stocks to meet solvency requirements, and tipping the whole market into a downward spiral.
Some listed firms also complained that investors agitating publicly for management shake-ups sometimes turned out to be just holders of borrowed stock, only interested in the short term.
The issue has been a recurring bone of contention in Ireland, with short-sellers accused of skewing the market in several companies, including Elan during its recent battle with the US Securities and Exchange Commission and e-learning group Riverdeep, where chairman and chief executive Mr Barry O’Callaghan accused short-sellers of triggering his management buyout and the delisting of the group.
