Short interest data can help active investors avoid large losses. Short sellers tend to be high-conviction traders. If they’re targeting a stock, there’s usually a good reason they are doing so.
In this report, we are going to analyze the short selling data on Solutions 30 SE (S30:FP). Solutions 30 is a French company that specializes in IT repair services. Operating in 10 countries across Europe, it serves customers in a range of sectors including the telecommunications, IT, security, energy, and retail sectors. The company is listed on the Euronext Paris stock exchange and currently has a market capitalization of €657 million.
Solutions 30: Short Selling Activity
A look at the short selling data on Solutions 30 reveals that there has been a large increase in the number of shares being shorted this year. At the start of the year, 4.4 million S30 shares were on loan. However, today, 6.4 million shares – worth €42 million – are on loan. That represents an increase of 45%, which is significant.
After this increase in the number of shares on loan, Solutions 30 now has short interest of 6%, which means that it is the third most shorted stock on the French market, behind McPhy Energy, and CGG, which have short interest readings of 7.85% and 6.27% respectively.
We can see that since the start of the year, four managers have declared short positions above the 0.50% short interest threshold.
One of these managers is Lansdowne Partners (UK) LLP, which shorted approximately 3.45 million shares worth €22.53 million on 2 July 2021. This is the investment manager’s only French short position.
Other managers to declare short positions this year include
- Gladstone Capital Management LLP - 1.6% as of 30 June
- Voleon Capital Management LP - 0.71% as of 7 May
- Adelphi Capital LLP - 0.50% as of 15 January
Lansdowne Partners currently holds the largest short position at 3.22% of the total shares in issue. This position is currently worth around €3.45 million. It’s worth noting that this is the largest short position held by Lansdowne Partners out of its total of 11 active short positions in the European market. This short position represents approximately 7.8% of the investment manager’s European short portfolio.
Report from Muddy Waters
Solutions 30 was recently the subject of a critical report from short seller Muddy Waters – who believes S30 is “likely involved in money laundering and is a fraud.”
Muddy Waters is concerned that Solutions 30’s auditor EY had issues with the company’s 2020 accounts. EY said that S30’s financial statements could contain “undetected misstatements [that] may be both material and pervasive,” and refused to sign off on them. The hedge fund is also concerned that when EY attempted to investigate the issues further, S30 impeded the firm.
“It should be obvious that what lies behind the doors EY could not open is highly problematic for the company,” wrote Muddy Waters in its report.
It’s worth noting that in late June, more than 30% of shareholders voted against approving Solutions 30’s 2020 financial accounts at the company's annual shareholder meeting. Meanwhile, more than 15% voted against Solutions 30's decision to replace EY as its auditor.
After the auditor issues here, it’s no surprise that short interest has increased substantially. Short sellers clearly expect the stock to fall.
Given the increase in short interest, we think caution is warranted towards Solutions 30 stock right now.