Several ASX-listed companies have experienced a surge in short selling activity in the lead-up to significant corporate actions handled by investment bank Barrenjoey. These actions include capital raises and block trades. Data indicates a pattern of increased short positions being taken out before these events, followed by a covering of those positions shortly after the deals are completed.
Dicker Data, a technology hardware and software distributor, saw its founder David Dicker sell 30 million shares in late August. This occurred after short sellers increased their positions in the company. Arafura Minerals, a company involved in rare earth mining, entered a trading halt ahead of an $80 million capital raise, also preceded by a rise in short selling. Lotus Resources, a uranium producer, similarly experienced a spike in short interest before seeking to raise $65 million.
Dalrymple Bay Coal, owner of the world’s largest coal terminal, also saw increased short selling before a significant share sale by Brookfield. Eagers Automotive, an ASX-listed car dealer, witnessed a jump in short positions before entering a trading halt to fund North American mergers and acquisitions. However, in Eagers’ case, the short sellers were ultimately unsuccessful as the company’s shares surged following the capital raise.
While Barrenjoey insists there are specific justifications for the short positions, this pattern is being discussed among fund managers and brokers. Speculation suggests potential information leaks or strategic positioning by traders anticipating downward pressure on share prices due to these corporate events. Barrenjoey insists it is coincidence and sour grapes among select investors who may have missed out on allocations.
