MARKET REPORT: ASOS shares fall as short seller warns over funds

Shares of ASOS fell after a short seller nicknamed the “dark destroyer” warned that the fashion brand will have to appeal to investors for new funds.

ShadowFall, an investment firm led by Matthew Earl, has bet against the FTSE 250 firm and built up a short position worth around £4 million.

That means nearly 11 percent of the company’s stock is lent to short sellers, who will make money if the stock price falls.

In addition to Asos, ShadowFall has targeted Boohoo (0.8 percent, or 0.42p, to 52.42p), magazine publisher Future (0.4 percent, or 5p, to 1120p) and was one of the first to spot financial shortcomings around the fraudulent payments processor Wire Card.

It comes as fears mount as to whether Jose Antonio Ramos, who was appointed CEO of Asos in June last year, can do enough to cut costs and reduce inventory.

David Reynolds, an analyst at asset manager Davy, said the Asos boss still has a lot of work to do.

He said: “The challenge is to “refresh” the business model while managing a somewhat strained balance sheet, ShadowFall’s view, which is the same as ours, that that will be difficult and the company will need further increases in capital. ‘

Russ Mould, investment director at broker AJ Bell, said Asos “failed to repair the roof while the sun was shining.”

He said: “Online retail had a good business during the pandemic. People had plenty of disposable income, there was nowhere else to buy clothes and the thought of braving a queue at the post office meant people were deterred from making returns, which is such a costly part of doing business.

Many of those factors have now been reversed, household budgets are tight, returns are easier to achieve and physical retail is an option.’

Stock Watch – React Group

Shares in React Group rose more than 4% after it posted record sales.

The AIM-listed cleaning company, which removes graffiti, cleans up flood damage and clears residential and commercial properties, reported a turnover of £9.3m in the six months to March 31.

This was more than the £5.1 million it made in the same period a year ago. And profits more than doubled to £2.5 million.

Shares rose 4.3 percent, or 0.05 pence, to 1.2 pence.

Shares fell 4.5 percent, or 35.2 pence, to 749.2 pence. The company is valued at nearly £750 million. Two years ago, Asos was trading at over 5000p.

The FTSE 100 barely moved yesterday, rising 0.02 percent, or 1.93 points, to 7912.2 and the FTSE 250 fell 0.22 percent, or 43.07 points, to 19226.94.

Acquisition fever remained rife in the City as Liontrust said it expected to know by May 4 whether it could buy Global Asset Management (GAM).

Last week, the asset manager confirmed press releases that it was in talks with Zurich-based GAM to merge the pair’s asset management businesses. Shares fell 1.1 percent, or 9.5p, to 831.5p.

Trainline rose the highest on the midcap index after broker UBS upgraded the online ticketing firm’s rating from “buy” to “neutral.” Shares rose 5.6 percent, or 13.4p, to 253.4p.

Similarly, Dunelm posted gains after two positive broker upgrades. The home furnisher was increased from ‘buy’ to ‘hold’ by Stifel, which also increased the target price from 1250 pence to 1270 pence.

And RBC raised Dunelm’s price target from 1250p to 1300p. Shares rose 1.5 percent, or 17 pence, to 1160 pence.

Business looked good for Card Factory after it released its third earnings upgrade since mid-November.

The greeting card and gift retailer said it had made at least £52 million in profit for the year to January 31. This was higher than the earlier forecast it gave in January of around £48 million.

Card Factory had expected to publish its annual results today, but will do so on May 3 after KPMG requested more time to complete its audit. Shares rose 10.4 percent, or 10.6 pence, to 112.6 pence.

Zillah Byng-Thorne, incoming chairman of M&C Saatchi, bought 143,536 shares in the advertising giant at an average price of 174 pence prior to her arrival on June 15. That meant she had a 0.12 percent stake in M&C. Shares fell 0.9 percent, or 1.5 pence, to 171 pence.