Is the £3 billion online grocery/technology stock Ocado (OCDO) to be squeezed even higher as short sellers feel pain? This week has brought news of a second international technology/warehousing deal - with Canada's second-largest retailer after a major French retailer only seven weeks ago. These deals have inflated Ocado shares well over two-thirds in market value, to 525p.
Before the Canadian deal, Ocado was the third-largest short on the London market, with 13.5% of issued shares loaned out, thus now putting hedge funds in a dilemma whether to nurse losses, increase their shorts or close out.
It has wider relevance beyond Ocado, ie how much notice should you take of accumulated short positions and when? The collapse of Carillion (CLLN) is now proclaimed obvious in hindsight, with 14.0% of its equity having been loaned out, making it the second most-shorted stock. Debenhams (DEB) at number one is having a sore time, too, its market value halving in the last six months.
good points paul.....was listening to an analyst last week who said that OCDO need Amazon to be successful because this will put pressure on retailers to up their online game which is what OCDO need to happen .also he made the point that OCDO are taking cost out of retailing whilst home delivery via a store pick system is adding to cost .as you point out the technical side of what we do is has to be spot on
Hoping for a chain reaction globally to the recent Casino deal, and going forward, with luck it won't much matter whether Amazon or Ocado gain the business of the first mover in any International market as the other should pick up the responder. All assuming that the engineers are now stopping the bots within a centimetre tolerance at Andover, I have said for months (elsewhere) that they may be struggling, and now we hear that they have been. Can only assume all resolved as Casino have joined Morrisons in an endorsement of OSP.
depends on the skill of the analysts ......if they follow retail then they are a sell.....if they follow technology then they might see them a buy .I've checked the brokers views and 3 are bearish and 4 are bullish so who knows what they're worth? but shorters have a whacking this time so caution is needed now when having a go at Ocdo
ICA ,Nordic region retailer may be about to sign in with OCDO ,according to the telegraph .we'll see about that but it must be said that hedge funds rushed to close short positions on the rumour hence the squeeze .also credit Suisse says they have outperform rating on OCDO .
I would guess Ocado is now the most heavily shorted share in the FTSE, as former leader Carillion has crashed 45% in the last 26 hours, so many of the vultures will have closed their shorts and taken their money.
Vulture investors are betting £336million that Ocado will crash and burn with its bid to go global.
Hedge funds are short selling 18.4 per cent of the online grocery company's shares the second-highest percentage of any firm on the London Stock Exchange behind construction firm Carillion.
This means traders will make money if Ocado's share price falls, effectively allowing them to bet against the business's success.
The short selling suggests that a rumoured takeover of Ocado by Amazon has been dismissed by many major financiers and that serious doubts remain over the firm's entire business model.
Shares peaked in 2014 when the food delivery firm proved a hit with customers, but since then have dropped by 50 per cent.
While it boasts some of the most cutting edge warehouse technology in Britain, Ocado has been battling to convince investors it has an achievable plan for the future at a time of unprecedented pressure on retailers
The biggest bet against Ocado is held by US hedge fund Discovery Capital Management, which was co-founded by billionaire Robert Citrone.
A 52-year-old former high-school wrestler, he is one of the so-called Tiger Cubs top money managers who learned their trade working for legendary investor Julian Robertson at his business Tiger Management.
Like many hedge fund bosses Citrone, who has four children with wife Cindy , has traditionally shunned the limelight but is known to own a small stake in his hometown American football team, the Pittsburgh Steelers.
He used to regularly attend games in the 1970s, even wearing the team's helmet during matches. Today though he is thought to live in a mansion in Connecticut.
As well as having a 3.46 per cent short position worth £63.4million against Ocado, his business is also betting against retail rivals Sainsbury's, Morrisons and Marks & Spencer.
Discovery's biggest punts tend to be in the developing world rather than the West. The firm is known to have taken several large positions in China over the years. There is a growing belief among hedge fund bosses around the globe that many grocery firms will slump faced with competition from Amazon.
Well done with your Saturday homework valet, you appear not to be alone in your conclusions judging by the share price, and mine are similar also.
My only persistent doubt is the one that spooked the analysts visit to Andover a couple of weeks age, and that is that they only saw the system working at 10% capacity. Now Ocado must have stress tested it, and Morrisons must be satisfied, otherwise they would not be involved in Erith, so I am sure my doubt is ill founded.
It's just the international grocery and retail trade who still need to be convinced to spend millions, but Amazons advance must be the catalyst for that. These are major supermarket chains we are talking about here, and if they don't have their own in-house automation coming off the drawing board now, they have no choice other than to cosy up with Ocado. The alternative i.e. to do nothing, is not an option for them.
interesting article in todays telegraph why Richard Bernstein thinks OCDO is undervalued and how he sees the value of the technology OCDO processes realizing its real value .not so much a grocer more a technology company . spent Saturday afternoon reading up on the amazon move and its obvious that the supermarket sector is going to have to up its online offering now to compete with amazons knowhow . feeling a bit more optimistic that things will work out here after all
agree....this is a big deal.....not sure you've come to the right conclusion about OCDO .....the market reactions suggests it's the bricks and mortor sector that will be thumped with this combination of competitor (amazon/whole foods )
Wrapped up in financial "mumbo jumbo" language but this appears to be no more than an attempt to again be economic with the truth and in my language is a "dilution" of share capital. The market seems to be interpreting it as such but if anyone can enlighten me then I would be most appreciative. After the "smoke and mirrors" announcement with the yet mystery client this is another PR "faux pas"and again brings into question the credibility of management or have I got it all wrong?
"Head of technology research at finnCap, Andrew Darley, tells us why AIM is the best place to invest in fast-growing businesses that drive productivity and efficiency.With companies under increasing regulatory burdens and pressure to demonstrate ..."
Thanks for that Valelte. In the case of Ocado, with over 50% held by top ten investors, the presence of Amber Crystal with 0.5% is probably fairly irrelevant. They do make the point however that the tech is undervalued in their opinion, and I would have thought they are on board for the ride. There will be some action sooner rather than later I am sure, otherwise Rausen and Roditti would have been gone long ago.
you make your point well Gene but an interesting development today is the arrival of activist Amber Crystal as a shareholder .they have a reputation for shaking management up and getting value out .well worth a read on this story in the telegraph business section .
This is a bit of a damp squib........the old adage of "buy on the rumour and sell on the news" comes to mind! So much unsaid........retailer ,region ,financial arrangements, potential, This is no way to assure shareholders and instil confidence and after 15 months is a tokengesture.
well , a deal with a regional European retailer might not be the slam dunk deal we were hoping for but its a start .as always with OCDO plenty here to be optimistic about but always the room to be disappointed . it's a hold for me
We have been here before but perhaps the management will shortly fulfil some of their targets. Stock has now crossed 200 day moving average which invariably is an encouraging sign. Never felt comfortable with their model and lack of profitability but seem to be working hard on their efficiencies and constantly being bombarded with special offers to maintain growth.........maybe they will surprise.
"LSE:MKS:Marks & Spencer admitted last week it would trial an online grocery shopping service this autumn to exploit the success of its growing food business. Its best brains were cooking up a plan, said chief executive Steve Rowe. Seems they work ..."
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