Abrdn short interest points to lack of faith in struggling asset manager’s leadership, strategy - but is it justified?
Risk-averse investor sentiment and internal issues have hit UK-based asset manager abrdn (ABDN) with a double whammy in 2022.
The abdrn stock price has slumped over 40% year-to-date, as of mid-October, leading to its demotion from the UK benchmark index FTSE 100 (UK100) and increased short sellers’ interest.
Will Abrdn short interest continue rising and lead to an abrdn stock short squeeze? Here we take a look at the latest news on the stock.
What is Abrdn?
abdrn is a UK-based investment company with about £508bn ( $573.9bn) in assets under management (AUM), as of 30 June 2022.
The firm categorises its revenue streams into investments, advisory services and personal wealth management business. abrdn also operates Interactive Investor, a subscription-based direct investment platform it acquired in May 2022.
In July 2021, the company rebranded from Standard Life Aberdeen to abrdn. It is listed on the London Stock Exchange (LSE) under the ticker ‘ABDN’.
What is your sentiment on ABDN?
What drives Abrdn short interest?
Asset managers in the UK suffered in 2022 due to the risk-off sentiment in financial markets across the world amid rising interest rates and growing fears of a recession in developed economies.
Capital outflows have particularly hit one of the UK's largest investment firms, abrdn. It reported a 28% year-on-year drop in operating profit in 2022 half-yearly results. Interim fee-based revenue fell 8% year-on-year to £696m, the company added.
abrdn said in its interim report:
While rival investment firms, including Ashmore Group and Hargreaves Lansdown, have seen similar struggles in 2022 due to the macroeconomic environment, abrdn has emerged as the biggest loser among the trio amid internal setbacks.
In an opinion column for the Financial Times, UK business columnist Cat Rutter Pooley said “abrdn is a victim of more than sectoral decline.”
In early October, a Sunday Times report suggested that CEO Stephen Bird may not have the support of his staff as several employees at abrdn have blamed him for “aggressive and intimidating behaviour”. This came after the company was accused of failing to carry out anti-money laundering checks following the revelations that its Luxembourg unit was missing documentation for some clients.
abrdn’s demotion from UK’s blue-chip FTSE 100 to second-tier FTSE 250 following the stock’s 43% year-to-date slump, as of 17 October, added salt to the wounds of the UK-based investment giant.
Unsurprisingly, abrdn short interest has surged since the start of the year. LSE data showed the percentage of short positions in abrdn has increased from 1.3% at the end of 2021 to over 6% by October 2022.
BlackRock Investment Management and GLG Partners were among the top short sellers with open short positions of 1.5% of the public float each.
Meanwhile, Ivan Ćosović, founder of data group Breakout Point, told the Financial Times that hedge funds have increased shorts against “listed long-only asset managers” due to the bearish near-term economic environment.
Is an Abrdn stock short squeeze likely?
The chances of an Abrdn short squeeze cannot be ruled out due to growing short interest in the company. Overcrowded short positions may result in an Abrdn squeeze, especially if favourable news on the macroeconomic front or company-specific front were to see light.
However with the UK’s finance ministry in dire straits following the sacking of Kwasi Kwarteng less than a month into his job as the UK Chancellor, investors have remained cautious and risk-averse.
According to research firm Morningstar, UK-based funds recorded their biggest monthly outflow in 10 years in September 2022 as investors withdrew £11.25bn ($12.84bn).
Furthermore, dividend cuts by investment firms like abrdn due to their falling top line are also growing concerns, which could add selling pressure on the stock.
Analyst rating data compiled by MarketBeat revealed five out seven analysts rated ABDN stock “sell” and two analysts rated it “hold”. The consensus ABDN target price stood at GBX 167.14 on 17 October.
Note that while increased or subdued short interest in a stock may provide an potential insight into a company’s performance, it shouldn’t be used as a substitute for your own research.
Investors and traders are encouraged to perform adequate due diligence on any security they wish to trade in. Remember, past performance does not guarantee future returns. And never trade money you cannot afford to lose.
FAQs
What is the short interest on abrdn?
LSE data showed showed the percentage of short positions in abrdn has increased from 1.3% at the end of 2021 to over 6% by October 2022.
Will Abrdn squeeze?
The chances of an abrdn short squeeze cannot be ruled out due to growing short interest in the company. However, short interest data should not be used as a substitute for your own research. You should always conduct your own due diligence before trading.
Is Abrdn a good long-term investment?
Whether ABDN is a good long-term investment for you depends on your risk tolerance, investing goals and portfolio composition. You should always conduct your own due diligence before trading. Remember, past performance does not guarantee future returns. And never invest money you cannot afford to lose.
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