Who is right about ASOS PLC (LSE:ASC), retail mogul Mike Ashley or hedge funds both in the City and Stateside?
Earlier this week, it was revealed that Ashley had increased his stake in the online fashion retailer, via Frasers Group PLC (LSE:FRAS), to above 5%
New Frasers chief executive Michael Murray, who also happens to be Ashley’s son-in-law, said “our investment (in ASOS) reflects the long-term strategic value we see in a partnership between ASOS and Frasers Group.”
That view, however, juxtaposed the staunch stance of hedge funds which have shorted the stock, so much in fact that ASOS is the most shorted stock in the UK.
According to a report in the Telegraph, funds both sides of the Atlantic hold large short positions on ASOS.
Citadel, a Chicago-based fund founded by billionaire Ken Griffin and Mayfair-based Marshall Wace are among several investors to short the stock, with nearly 8.4% of ASOS shares believed to be on-loan to short-sellers, the highest on record.
Short sellers will buy ‘borrow’ the stock and sell them on, before buying them back at a lower price and returning it to the original owner at a profit.
The Telegraph said that four hedge funds have increased their ASOS short positions in total while a fifth, GLG Partners (NYSE:GLG), has reduced its short position.
ASOS’s shares are down 75% so far this year, with the retailer issuing profit warning after profit warning.
While it reported a sharp decline in profits in its full-year results released last week, the 12-month transformation plan laid out by the new chief executive José Antonio Ramos Calamonte was, overall, well received by analysts.
Whether he can execute it or not remains to be seen, but the consensus is that it was the first step in the right direction.