HMV Short On Stock

Investors are betting against the stock of British retailer HMV more than any other on the FTSE, according to Dataexplorers.

The troubled music retailer turned 360-degree music company has about 24 percent of its shares out on loan to people who’ll make money if the price drops.

Most FTSE companies would have somewhere between 2.5 percent and 5 percent of its shares on loan to be “shorted.”

These investors (“short sellers”) bet on a share price being too high by borrowing stock from a financial institution and selling it in the market.

The intention is to then buy back the shares when they’ve dropped in price and return them to the lender. The shorter pockets the difference. Likewise, when the stock price rises, their holdings lose value.

During the credit crunch, short sellers drove down stock prices of the major banks by gambling on the crisis getting worse. It’s not hard to see why they like HMV stock, given it’s dropped 55 percent in the last three months.

In the last two weeks, the company has had its trade credit insurance cut and has hired financial adviser KPMG to help reorganise its debt.

Schroder Investment Management – one of its biggest shareholders with a 6 percent stake – said the management should be left alone to keep developing its strategy.