DIA has become a frustrating play for short sellers. The Spanish supermarket chain’s shares are up 12% this year, outperforming peers.
That’s unwelcome news for the firms that have collectively sold short a quarter of DIA’s shares, according to IHS Markit, worth about €820m at the current price.
Among them is Marshall Wace, which also bet against Carillion, the UK building contracting company that plunged 71% last week.
DIA has become the most-shorted stock in the Stoxx Europe 600 Index, IHS Markit data show.
Marshall Wace, GLG Partners and Capital Fund Management all increased their short positions in DIA this month, even as the Madrid-based company is expected to raise earnings per share 31% this year.
Of the 31 analysts who cover the stock, 27 rate it buy or hold, according to data.
“Most short positions are there because investors believe DIA’s margins will shrink, as happened to other retail players in the main European markets,” said Jose Rito, an analyst at Banco BPI in Portugal, with a buy rating.
A spokeswoman for DIA, whose full name is Distribuidora Internacional de Alimentacion, declined to comment.
KKR-backed Marshall Wace, the biggest bear, has built its wager over two-and-a-half years to a 3.6% stake, currently valued at €115m, filings show.
A spokesman in London for the fund declined to comment. The shares are trading about 32% below their 2015 high.
DIA is more liquid than many peers, with a relatively high trading volume and availability of shares, making it easier to borrow the stock to sell short, analysts said.
The company paid its annual dividend yesterday, providing a yield of 3.9%. That beats the 3.3% average of the 21-member food and drug retailers index.
“For me, and most Spanish analysts, it’s hard to understand why this company has such a big short interest,” said Intermoney analyst Antonio Pausa, who rates the stock a buy.
“But the market is sovereign, and you have to accept that,” he said.
DIA’s shares fell yesterday at one stage by 1.8%, to €5.19, valuing the retailer at €3.22bn.
It has traded in a wide range of between €4.18 and €5.82 in the past 52 weeks.
The shares are still about 3% down from levels of a year ago. n Bloomberg
© Irish Examiner Ltd. All rights reserved