Why would almost a third of a bank’s stock be out on loan on Friday, then drop back to under 5% on Monday? It’s an interesting point highlighted by a paper from Richard Davies Investor Relations. Having undertaken detailed analysis of stock-lending levels in a range of PLC stocks, the firm notes that these big shifts take place around ex dividend dates. A reasonable conclusion, therefore, is that this is linked to dividend arbitrage – the practice of moving stock between jurisdictions in order to reduce the tax hit on dividends. Whilst, in its basic form, the practice is legal under FCA rules, the hugeRead More →

In Germany there are signs that banks may be coming closer to the day when they pay up for their involvement in dividend tax manipulation. According to recent reports, German banks could be on the hook for 610m euros. The case involves trades which enabled some international investors to benefit from tax breaks intended for German shareholders. In the case of cum-ex trades, more than one investor was able to claim the tax break on the same shares. Deutsche Bank has found itself tied up in the scandal. Whilst it maintains that it did not undertake any of the trades itself, it appears to haveRead More →

As always, we like to keep an eye on what’s happening with short positions in UK companies. To reiterate, short sellers do not always get it right, but given the risks involved it’s useful to see if there are any trends. Some might not be surprised to hear that large shorts in troubled construction and outsourcing firm Kier Group are on the up. Large 0.5%+ shorts in Kier now total almost 10% and, given that there are likely to be others below the 0.5% disclosure threshold, the total short could be pretty chunky. What’s more, a number of the shorts have increased since the company’sRead More →

Another week, another story about industry and ownership concentration. As we’ve noted previously, a mixture of industry concentration within sectors, and ownership concentration in relation to firms, has started to attract some attention. A recent piece in the Wall Street Journal looked at the former, whilst an FT article this week focused on the latter, in particular the growing power of passive managers. The obvious link between the two is… Albert Hirschman. One way that regulators and others seek to assess the level of market concentration is by working out the Herfindahl-Hirschman Index (HHI). Named after two economists, Hirschman and Orris Herfindahl, the HHI scoreRead More →

As PIRC Alerts readers will know more than most, there’s a lot of talk about capitalism these days. The rise of populist politics of Right and Left, the shock of Donald Trump’s election in the US, and of Brexit in the UK, have led to more questioning of our economic model than has occurred for decades. A significant theme in this discussion has been the focus on the extent of competition within industries. Although textbook economics tells us that competition is the name of the game, in Actually Existing Capitalism this is less clear. Tech companies come most easily to mind – when was theRead More →

In 2018, after receiving a 44% vote against its remuneration report, a chastened PLC stated: “We acknowledge this feedback and thank those shareholders who have already spoken with us and explained their reasons for not being able to support this resolution… we are committed to continuing this dialogue with our shareholders.” This was similar to a PLC which stated in 2017, in response to a 24.8% vote against its remuneration report, that: “The Chairman and the Chair of the Remuneration Committee will seek to meet with any significant shareholders who voted against the report to further identify any other issues that arose.” That in turnRead More →

Only a minority of Australian superannuation funds disclose their voting records, and many have failed to back shareholder resolutions on ESG issues in their own country, whilst supporting them overseas. Those are a couple of the top-line messages from a new report from the Australian Council for Corporate Responsibility (ACCR). According to the ACCR, just 11 of the 50 largest funds disclose a complete proxy voting record, including both Australian and international shares. And just three funds supported more than 75% of the shareholder proposals on ESG issues that they voted on globally in 2018: Local Government Super (91%), Vision Super (88%) and Cbus (77%).Read More →

Metro Bank went into today’s AGM having taken fire for both its financial reporting and due to an ill-advised business relationship between the firm and a company run by the chair Vernon Hill’s wife. It’s also a heavily shorted stock. Just based on public disclosures (which only include shorts above 0.5%) the short position is over 10%. In practice it is likely to be significantly higher. What’s striking about shorting these days is the involvement of more traditional institutional investors, alongside the hedge funds. For example, shorts in Metro Bank include both Odey, with 3.83%, and Artemis Investment Management, with 0.87%. Or if we lookRead More →