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Naked shorting was highlighted in the March 2022 documentary “Gaming Wall St”. A former Morgan Stanley employee said on camera that he engaged in it every working day. He came clean on camera … after retiring with a pot of money. The US is better regulated than the UK, so the question in my mind was is this happening in the UK? And what body is regulating that activity? If it’s the FCA then we are all in trouble … they couldn’t stop the mini bond scandal from happening despite being told two years before. The recent Panorama programme exposed them. The head at the time was Andrew Bailey, who now heads the Bank of England. Jesus wept.

I think it’s pointless currently to look at the declared short interest, and infer anything from small % moves up or down. There could be much more shorting activity being undertaken below the disclosure level. It looks like a rinse and repeat strategy … borrow, generate headlines in the press, short … buy back then repeat the process at a lower level. A gradual grind downwards. Given the prevalence of naked shorting in the US, where phantom shares are sold, I wouldn’t be surprised if the same is happening in the UK. Does any authority actually monitor for such activity? It’s a manipulation designed to push private investors to capitulation.

The economic headlines are poor and there’s no sign of green shoots, although I’m sure they’ll come eventually. So no reason for any shorting organisation to pull up the draw bridge. Would be fun to see some “meme” stock activity amongst Boo/THG and ASOS … but don’t think that’s likely.

Boo Hoo are in the grip of a massive shorting operation, so SP moves cannot be attributed to “shareholders” … it strikes me as a confident move as they move into the perfume, cosmetics and skincare space.

Observation - every time you see an article in a newspaper about short hedge funds attacking Boo and ASOS that's a signal that the SP will be under pressure in the following days. Plant a story with a friendly journalist/publication and give the impression that shareholders are selling down in response over the following days. It's all shorting activity, gaming the SP. The Daily Mail is the journal of choice ... it never runs out of reasons to tell their readers that Boo and ASOS are being shorted. It must be difficult writing the same article every couple of weeks?

As long as the issues of supply chain, post Covid shocks, inflation and war persist this game will continue to play out. As these issues recede that game becomes more difficult. And that is why patience is the only virtue needed here. Shareholders in private companies don't have this problem, as there is no market that can be rigged. They are also not subject to lobbying to authorities over indiscretions, as there is no money in it for the lobbyist. Reminder that you own a share of a business, not a SP.

This article is just a continuation of short seller focus on ASOS and Boo. They have been lobbying the CMA and other authorities with negative views on these companies and have been encouraging them to investigate, using their friends in the media to publish stories and ramp up the negative perception. It’s not out of altruism or concern for the consumer, it’s all down to making money by manipulating the SP lower. If they can push a company into bankruptcy they can really cash in. I’m not unsympathetic to shorting fraudulent companies but when they attempt to destroy a viable company that has made mistakes and/or is grappling with macroeconomic issues I’m less sympathetic to shorters. That activity just seems borderline criminal.

I just read Dan McCrum of the FT’s book about Wirecard. That company was an out and out fraud. His main source of information came from hedge funds who were short Wirecard. That’s why journalists are supportive of short sellers, publish articles in support of their causes and are never critical of them. They provide sources for stories and you might just get an award winning book out of it.

My observations over the last decade of viewing commentary on bulletin boards and financial press is the power of narratives, the stories that we tell to explain the circumstances that a listed company finds itself. In 2020 the narrative was that online fashion was finally taking over from bricks and mortar … why? I suspect it was more to do with rising relative SP’s than the underlying explanation. Now that the numbers have been hit by post covid shocks and military conflict the narrative has reversed … online heading for the exit, never to recover. Narratives tend to predict permanent doom or permanent euphoria, but they are seldom correct. I bought shares in Next after a headline grabbing analyst suggested that they had met their “Kodak” moment, after a well known Harvard Business Review article explaining the demise of Kodak, who failed to capitalise on their digital camera technology for fear of jeopardising their film business. The gist of the analyst was that stores will bring them down … which I thought was crazy given the size of their online business. At the time Next had screwed up on their basic merchandising, leading to considerable sales loss. A problem that is easily fixed. But lower sales scared the horses enough to push the SP down to the 30’s. In short order they were back above 80.

My conclusion is beware of narratives, because whilst they might look attractive on the surface, they could very well be defining a temporary issue as a permanent one.

Fira ... I believe that Debenhams was bought to launch perfume, cosmetics and skincare ... and not so much for general merchandise. It will be interesting to see how it develops. Fraser's purchase of Misguided my end up being ... misguided ... they are a bit hit and miss when it comes to acquisitions and not particularly customer friendly. For BooHoo still a hard slog ahead.

What’s looking better?

Still plenty of issues out there … inflation, supply chain woes, lack of US DC, and the impact on the consumer … so if you’re short Boo there’s no reason to close positions in a hurry.

The question really is how permanent and imbedded the above issues are? Supply chain freight charges are falling, many commodity prices are doing likewise. So some green shoots. US inflation may well have peeked, we will see over the course of the next few months. The War in Ukraine keeps rolling along, but I’m not convinced that Russia can sustain this campaign and may well be looking for a face saving exit. If the war looks like it is nearing the end and inflation starts to drop the market will react violently positively. If I were short that’s what I’d be worried about … when it moves, especially for AIM stocks, it moves quickly. As time passes we also get nearer to the opening of the US DC, another positive development. Unless you are prepping for the Apocalypse, my guess is that conditions will get more positive sometime in 2023.

The point is that returns payment will be standard practice, the rest will follow. Developments in technology will reduce the sizing problem in the future. And when the headwinds of inflation, supply chain disruption, etc subside, the company will be in a better position. Not all customers are profitable, and if the worst offenders are weeded out all to the good.

The “customers” most put out by returns charges are those that game the system, and don’t contribute to the bottom line, rather they deduct from it. Would be great if they transferred their loss making custom to Shein, causing them problems instead of Boo Hoo. It was the right decision, long overdue, and sets the company up for 2023 when the economic headwinds begin to recede.

Sensible move, and not before time. I suspect that every retailer will follow. Those that game the system will move to competitors, and as their returns increase they will be forced to follow suit and impose charges. I don’t think the industry will return to free returns.

I saw an excerpt of an article on Twitter, from Investor’s Chronicle … it noted that shipping rates are falling back, an indication that the supply chain issues are receding. There is still a long way to go but the more positive news over the next 18 months the less easy it will be to manipulate the SP. The new US warehouse next year is another milestone to look out for. As is waning inflationary pressures. My personal view is that those willing to hold over the next three years will be rewarded. Previous experience with underwater holdings indicates that when the SP moves it does so at incredible speed.

During the last financial crisis in 2008 Taylor Wimpey's share price fell to around 7p. Around 7 years later it was 28 times that figure, above 200p. In January 2016 Glencore was down at 73p, and 6 years later it was 6.5 times greater. I'm guessing at the time they were being heavily shorted, and the bulletin boards would have been full of people lamenting the SP and calling for the CEO's head ... or predicting imminent bankruptcy.

At times intrinsic value (valuation based on an objective evaluation of the facts) and market valuation (based on buying and selling volumes, and arcane trickery) can disconnect from each other.

Camelot are a major shareholder in ASOS.

The key question is can Boo Hoo manage through this period? Conditions will be poor through 2022 and a good part of 2023. Then what? When supply chain issues and inflationary pressures ease, what then? If your investment horizon is weeks then this is one to avoid. However, if your timeline is years you might do very well. Retailers do go through rough periods but those that get through them tend to do very well for several years after.

When a retail company is going through a tough trading environment these moves are never welcome, but may look far sighted when things pick up, as they always do. And then you are expanding into a growing market with fewer retailers to compete against.

Naked shorting is illegal and widespread ... but you'll struggle to find any mention of it in the financial press. Has anyone seen "Gaming Wall St", the documentary on the GameStop/RobinHood story? I'd bet very few people have, and no financial journalist that I am aware of wrote about it.

My suspicion is that most of the scoops that journalists receive come from hedge funds who have already placed a short in the company. The FT journalist McCrum won a prestigious award for his reporting on Wirecard. I suspect his first sources came from the hedge fund community. That’s why you see very little negative reporting of shorting, and lots of articles that are negative about a company being shorted. It’s almost like the newspaper and hedge fund coordinate the timing of the article. The recent documentary Gaming Wall St highlighted the massive naked shorting that is going on, with regard to companies like Game Stop. Naked shorting is illegal and is rife in financial markets. Has anyone read an article in any prominent financial paper highlighting this? No, me neither. We are all being gamed.

Hi Nige. Of course you remember because you were also around at that time. TomLondon disappeared when the SP went north and his failed predictions looked sillier and sillier by the day. I only posted because I saw the name and recognised the modus operandi. The same writing style and the same nonsense. Posters beware.

On ITV, it is still dependent on advertising revenue so anything that might impact that adversely will hit the SP. Anyone holding needs to be prepared to hold for a few years. It is still very vulnerable to M&A, so that could happen at anytime and would, in my opinion, take the SP well north of 150p. When it moves it moves quickly. I don’t think a patient investor buying at this level will lose money, more likely to make a decent return. I’ll keep an eye on it.

I recall a few years back someone called TomLondon who laced this thread with the most cataclysmic predictions. An investor at the time decided to sell his holding at a loss based on the presumption that “Tom might be right”. He would have missed out on a doubling of the SP in short order. I’m no longer a shareholder, I’m one of the fortunate ones that made a large gain, but I like ITV at these levels and am watching at the sidelines. So I thought I’d take a look at the board … only to see a new Tom. I wonder if they are related?

I like the Ben Graham analogy about Mr Market, your bipolar business partner who at times gets overly optimistic and overly pessimistic. The quote was that “he is there to serve you, not to guide you”. In other words take advantage of him when prices are high, but never become under his influence when the opposite applies. Beware of Tom’s bearing gifts.