Samsonite Intl (1910 HK) share trading is suspended in Hong Kong with the stock down 9.84% at 30.70 HKD. Samsonite is down 17.8% from its year-to-date high of $37.35 HKD on April 11th and down 14.48% year-to-date. Blue Orca Capital, led by ex-Glaucus Recearch head Soren Aandah, issued a research report purporting that Samsonite “concealed slowing growth through debt fueled acquisitions and that it has massaged earnings and inflated margins through highly questionable purchase price accounting.”
Samsonite is the 24th largest short in the Worldwide Apparel, Accessories and Luxury Goods Sector and 11th largest international short. Samsonite short sellers have been building their positions over the last month with $ short interest up $45 million over the last thirty days, the 4th largest worldwide increase in the sector, and up $32 million over the last week, the 2nd largest increase in the sector. It appears that most of the increase in short selling occurred just prior to the release of the Blue Orca report.
The Apparel, Accessories and Luxury Goods Sector has not been kind to short setters in 2018 with shorts down an average of 13% on their open positions with only three stocks generating over $10 million of profits in 2018 while nineteen have incurred over $10 million in losses. The biggest winners were Pandora A/S (PNDORA DC) and Hanesbrands (HBI) while the biggest losses were in LVMN Moet Hennessy (MC FP), Under Armour (UAA) and Fossil Group (FOSL).
Samsonite short sellers were only up $2.8 million in year-to-date mark-to-market profits prior to today’s trading. With today’s 10% price drop, shorts are up $12.6 million in daily mark-to-market profits, bringing their year-to-date total to $15.5 million. There is ample stock borrow availability in the name and it is presently trading at general collateral levels.
We are seeing additional shortside demand in the name today and when trading resumes there will certainly be down side price pressure generated from new short selling activity. If long shareholders get skittish from the Blue Orca report and the prospect of additional shorts entering the trade we may also have long sales pushing Samsonite’s stock price down as well. Selling from both sides will test the $30 HKD support level, which the stock bounced off of in today’s intra-day trading. If there is validity to Blue Orca’s report we should see longer term short activity as existing shorts build their books and new shorts enter the trade. If Samsonite’s stock price dips after trading re-opens, long shareholders will sell along with the shorts in order to lock in recent mark-to-market gains. Either way, Samsonite’s $ short interest should increase significantly if its stock price does not quickly recover from today’s free-fall.
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Managing Director Predictive Analytics, S3 Partners, LLC
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