Thu, Mar 09, 2017 - Page 10 News List

Shorts targeting Toshiba: BlackRock filing

Bloomberg

Buried in an obscure filing this week was another hint of the trouble faced by Toshiba Corp.

BlackRock Inc, the third-biggest owner of the embattled Japanese company, indicated in a report to the Japanese Ministry of Finance that there has been a huge increase in the stock it has out on loan.

The world’s largest money manager said about 46 million Toshiba shares owned by its units, or about one-fifth of its total stake, are temporarily being held by others.

That was up from just 1.4 million when it filed its last report in January. BlackRock was not available to comment.

Borrowed shares are mainly used in short selling, betting that a company’s stock will fall.

Short interest in Toshiba has surged since last month on speculation that the company will be demoted to the second section of the Tokyo Stock Exchange or delisted, either of which would mean index funds would need to sell large amounts of the stock.

Short interest stood at 8.6 percent of Toshiba’s free float on Friday last week, one of the highest levels among companies in the Nikkei 225 Stock Average, IHS Markit Ltd data showed.

The average for stocks in the equity gauge was 2.3 percent.

The cost of borrowing Toshiba’s shares is among the highest in the index, the data showed.

Toshiba’s shares plunged 24 percent this year through Tuesday’s close, the biggest decline on the Nikkei 225, as the company reels from a US$6.3 billion write-down in its nuclear business and seeks to sell assets, including its prized chip unit, to stay afloat.

Akira Kiyota, who heads Japan’s main bourse, last month said Toshiba faces three risks that could lead to delisting.

The stock yesterday added 2.2 percent in Tokyo trading.

For one brokerage, which had recommended being short Toshiba, the depth of pessimism is now overdone.

“It’s sentiment driven,” said Amir Anvarzadeh, head of Japanese equity sales at BGC Partners in Singapore, who told clients last month to cover their Toshiba short sales.

As it is getting harder to borrow the shares, there is a bigger chance of a short squeeze, he said.

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