(Bloomberg) – Globe Life’s record decline this week extended the winning streak of a group of short sellers who issued reports against the insurance company.
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Fuzzy Panda Research, an anonymous organization that publishes reports on companies betting on stocks, is the best-performing activity in 2023, according to an analysis of breakout points for companies that have made at least two calls. The company became a short-selling company. It found that companies shorted by Fuzzy Panda lost an average of 63% last year.
Globelife's record 53% drop on Thursday adds to a solid start to the year for Fuzzy Panda, which has released a report showing all three companies it has released so far in 2024 will see their stock prices fall. The company's performance over the past few years stands out among its generally strong performance. It's a tough backdrop for short sellers who have been hurt by the meme stock boom of 2021 and have been battling a bull market.
“Even if Fuzzy Panda isn't as famous as Muddy Waters, Gotham City or the Hindenburg, their track record is one of the most impressive,” said the founder of the Düsseldorf, Germany-based data tracking company. said Ivan Kosovich of Breakout Point. “This gave them almost inside information within the activist short seller community.”
Fuzzy Panda did not respond to a request for comment from Bloomberg News.
Globe Life criticized the report, saying short sellers had uncovered “pervasive allegations of insurance fraud that management had ignored” and said it would review its legal options. The company's stock price rose 20% on Friday.
“After reviewing the report, we found that the report is grossly misleading and confuses the anonymous allegations with the reuse points imposed by the plaintiff law firm to force Globelife to settle,” the company said in a statement. It turned out that.”
Still, the report appears to concern shareholders, given that the company acknowledged in March that it had been subpoenaed by the U.S. Department of Justice.
“It was recently revealed that the Department of Justice has issued a subpoena to the company to investigate some of these allegations, which could lead to significant stock price volatility,” Evercore ISI analysts led by Thomas Gallagher wrote in a Thursday note. I think it brings certainty.”
He maintained his inline rating, but lowered his price target on the company from $125 to $75, reflecting uncertainty about how things will play out and whether Globe Life will be subject to fines.
Read more: Why activist short selling is controversial: QuickTake
Analysts at Keefe, Bruyette & Woods said they viewed Thursday's decline as excessive but said short-term uncertainty was a problem.
“If the allegations are accurate (highly uncertain), this could lead to financial penalties, significant disruption to AIL's sales, and reputational damage,” analysts led by Ryan Krueger said in a note Thursday. “High,” he said, maintaining his price target and market performance rating at $130. . He added that there are no charges against Globelife's remaining distribution services, which should limit the potential impact to some extent.
Not all of the targets have been down since Fuzzy Panda announced its short position. Red Violet, which the group shorted in 2018, has soared in recent years, and BioDelivery Sciences International, which Fuzzy Panda said it shorted in 2019, will be acquired by Collegium Pharmaceuticals in 2022. . Terra Tech Corp. merged with Unrivaled Brands Inc. in 2021.
However, the recent slump in the stocks covered by the report has drawn attention.
“Fuzzy pandas have been active since 2018, but there was a period of reduced activity between 2019 and 2021,” Kosovic said. “With their impressive performance in recent years, their fan base has increased even more significantly in 2022 and 2023.”
–With assistance from Katrina Compoli and Bre Bradham.
(Updates stock price movements when the market closes.)
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