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Chart of the day: shorting infrastructure

Chart of the day: shorting infrastructure
October 6, 2015
Chart of the day: shorting infrastructure

But as IC reader Steven Oliphant points out, not everyone agrees on the health of Carillion’s prospects. In fact, the company is currently the most shorted stock in London, with at least 18.6 per cent of its shares out on loan. That’s according to the Financial Conduct Authority (FCA), which publishes a list of all short positions equal to or greater than 0.5 per cent of a company’s total outstanding shares.

Seven institutional investors – including BlackRock and Och-Ziff – were short the company by at least that amount when we flagged Carillion’s bears in April. That number has now doubled to 14.

It appears the cabal of hedge funds agree with JP Morgan Cazenove analyst Emily Biddulph, who in a note earlier this year said Carillion’s indebtedness would continue to weigh on margins regardless of expected revenue growth this year. A slip in half-year underlying profit margins from 5.5 to 5.1 per cent seemed to underscore this - though the company expects to maintain last year’s 5.8 per cent margin for the 12 months to December 2015.

The shares are down 8 per cent so far this year, but it’s worth remembering that a short-seller must pay both an interest premium and any dividends to the shareholder the stock was borrowed from. The bears will need to see a far greater fall in Carillion's stock before they are vindicated.

The full list of short positions disclosed to the FCA can be found here.