Abrdn (LON: ABDN) shares are on the list of most shorted on the London market. ABDN shares could be on the short sellers’ lists because of a short term and technical matter. Or, there could be some worry about there being a longer term and more important decline in the business. It’s also true that the short term idea carries within it the germ of a longer term problem. So it’s not cut and dried either way, Rather, the wonder is about which of those time spans the shorts are trading upon?
As to what’s done at Abrdn - other than the nonsense of the name change - most of us know that: “It is the largest active asset manager in the UK, with investments in equities, multi-asset, fixed income, liquidity, sovereign wealth funds, real estate and private markets. In July 2021 the company changed its name from Standard Life Aberdeen to Abrdn.” It runs savings plans, funds and so on containing near £400 billion so it’s a big beast. But the equity of a fund manager depends not on the size of the funds managed, but the profits made from doing the managing. Which can be a rather different beast of course. It’s not true that a rising stock market necessarily will boost a fund manager - nor a falling one depress it. It’s the efficiency with which the organisation is run that matters more than anything else - the margin that can be made off the 1 and 2% charged to savers.
Abrdn share price from Google Finance
The short position against Abrdn is some 3.5% of the equity - Blackrock, Citadel among them. So, what’s the bet here? Well, that falls into two classes of argument. They do, more than a little blend into each other.
The first is the long term argument. Abrdn isn’t being run very well therefore the shares will go down. That’s obviously possible. On the other hand it costs money - the borrow rate - to short. So, short sellers tend to be looking for some short term trigger for a share price movement rather than be taking a long term view. Abrdn has just fallen out of the FTSE100 - again - and is now in the FTSE250. This prompts a shareholding shuffle. FTSE100 trackers have to sell, FTSE250 trackers have to buy. But there are far more funds in 100 than 250 trackers (FTSE350 trackers just need to change their weights, an easier thing). So, in falling out of the FTSE100 there should be a one off drop in demand for ABDN shares, thus a one time price move relative to the rest of the market.
The difficulty in fully untangling these is that the fall in the ABDRN share price that led to falling out of the FTSE100 is probably based upon appraisals of the likely long term performance. So we can never fully distinguish between the two reasons.
