Short selling data can be a very useful research tool for active investors. Not only can it help investors avoid stocks that have deteriorating fundamentals, but it can also help investors identify stocks that have improving fundamentals.
In this report, we are going to analyze the short interest data on WM Morrison Supermarkets PLC (MRW:LN). WM Morrison Supermarkets is one of the big four supermarkets in the UK with a market share of around 10%. Recently, its share price shot up after the company received a £5.5 billion buyout offer from private equity firm Clayton, Dubilier & Rice. The company is listed on the London Stock Exchange and has a market capitalization of £5.6 billion at present.
WM Morrison Supermarkets: Short selling Data
Our short selling data shows that since WM Morrison announced the buyout offer from Clayton, Dubilier & Rice on 19 June, the stock’s short interest has decreased significantly. On 18 June, around 139 million MRW shares were on loan, equating to short interest of about 5.8%. However, today, there are only 79 million shares on loan, equating to short interest of 3.3% – well below the 2021 average short interest figure of 4.7%.
This significant decrease in short interest tells us that a number of short sellers have closed or reduced their short positions since the buyout offer was announced. According to Bloomberg, BlackRock reduced its short position from 2.29% to 1.13% on Monday while Citadel and GLG Partners reduced their bearish positions to below levels that require public reporting. This indicates that they are no longer as bearish on the stock as they were before the buyout offer was announced.
It’s worth noting that Morrison’s management rejected the offer from Clayton, Dubilier & Rice, stating that the £5.5 billion bid “significantly undervalued” the company. In a statement, the FTSE 250 company said: "The board of Morrisons evaluated the conditional proposal together with its financial adviser" Rothschild & Co, and unanimously concluded that the conditional proposal significantly undervalued Morrisons and its future prospects.
Experts believe this rejection could flush out more bidders, resulting in a higher takeover offer. One investment manager who believes the company will see a higher offer is Massimo Stabilini, the founder of Sinclair Capital – a London-based hedge fund that operates an event-driven and M&A arbitrage strategy. Stabilini told Bloomberg that he expects a deal as high as £2.70 per share. That’s roughly 16% above the current share price.
Under UK takeover rules, Clayton, Dubilier & Rice has until 17 July to announce a firm intention to make an offer or walk away. So, we could see some interesting share price action here in the next few weeks.