This is Philip Scott.
He’s the finance director of Aviva and does he not like short sellers.
From Tuesday’s Financial Times.
Mr Scott insisted the movements in Aviva’s share price were related to shorting. “[Denying the connection] really does defy logic and it defies what people know is actually happening in trading.”
He said a results day for an insurer had become “a day for the bears to feed”.
Indeed!
The background here is that Aviva is considering suspending lending shares to hedge funds and Mr Scott has sounded out other big European insurers about curbing stock lending.
But they are not interested.
On March 6 Mr Scott e-mailed 20 leading European insurers asking for their views on a temporary withdrawal from equity stock lending. But the three replies he received “convinced me that the idea was impractical”. Two of the insurers that responded said they no longer lent equities. The other was not supportive.
Somewhat predictably, there is only a little bit of evidence to suggest that the recent plunge in the Aviva share price is down to short selling.
When Aviva released its annual results around 1.1% of the company was on loan as this graphic from Dataexplorers.com shows.
Since then the amount of stock on loan has almost doubled to 2.1%. But just to put that figure into perspective, 2.1% of Aviva’s share capital amounts to just 55.9m shares.
Not a huge total – a position that could be covered in just over two days of average trading – and certainly not enough to have driven Aviva shares down 30 per cent this month.
So what’s going on here? Is Mr Scott trying to create a smokescreen? After all one could argue Aviva’s plight has more to do with long only funds selling because they are concerned with Aviva’s decision to continue paying a dividend it can barely afford, its commercial property exposure and solvency levels.
Or is that being too cynical?
Anyway, here’s the recent price action in Aviva.
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