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Abrdn short interest points to lack of faith in struggling asset manager’s leadership, strategy - but is it justified?

By Mensholong Lepcha

Edited by Jekaterina Drozdovica

17:24, 17 October 2022

Person holding smartphone with logo of British investment company abrdn plc on screen in front of website. Focus on phone display. Unmodified photo.
Abrdn short interest points to lack of faith in struggling asset manager’s leadership Photo: T. Schneider / Shutterstock

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’. 

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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: 

“Current market uncertainty means our ambitions for revenue growth and improved cost/income ratio are likely to take longer than originally expected.”

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.

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ABRDN STOCK PRICE 2017-2022

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.

Markets in this article

UK100
UK 100
7964.5 USD
23.7 +0.300%
ABDN
Abrdn plc
1.4090 USD
0.001 +0.070%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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