Why The Hut Group is wrong about the short-sellers

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Citi Comment: Matt Molding should buy his own shares

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Tea

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Here’s a long, scandalous, and quite funny history of big company owners lamenting about short-selling.

Back in 2006, Enron chairman Ken Lay blamed the downfall of the now infamous energy trader on bad investors who dared to bet his shares would fall.

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In 2008 HBOS said that shorts were undermining the bank, claiming it was going bust. It was and it did. City Watchdog, then the FSA, dropped a brief investigation into claims it illegally profited from shorting the stock due to a lack of evidence.

In 2019 when Wirecard was feeling the heat from some spectacular FT journalism, the German company and indeed the regulator decided that the paper’s reporting was part of a dastardly conspiracy with shorts to undermine a national champion. Like the others, Wirecard went bust because it was bust, not because of stock trades.

And now here comes Matt Molding of The Hut Group, who believes his firm is the victim of a vicious short attack the media, hedge funds and investment banks are all conspiring against.

THG isn’t Enron and there’s no reason not to wish it were okay. But this short life on the stock market so far has been extremely miserable and it probably isn’t there.

A better stance than molding would certainly be to say that short-sellers are completely entitled to their opinion, but they sure are wrong.

Meanwhile, well the shares are now bargaining at basement prices and he is buying them at speed and in larger quantities, he might say.

The thing about short selling is that most people who do it end up losing. It’s not an easy road to wealth, it’s risky stuff.

If you had shortened the FTSE 100 by 1000 points every year since its inception in 1984, you would now be nearly 100 times higher.

The point of shorts is to keep the market honest, presenting red flags that may, or may not, be helpful to everyone.

Moaning about them shows that you don’t get the stock market and it would be better to stay away from it.

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