In the stock market, bassist is not understood as a musician who plays a four-stringed instrument, but rather as someone in charge of practicing a somewhat more lucrative melody, that of buying low and selling high, only altering the order of the factors. Convinced that the value of a listed company will fall, these opportunistic investors borrow a package of shares to sell them at a good price and then, when the time comes to return them, repurchase them cheaper, as long as their forecast has been fulfilled. In most cases, they do it as a bet or to diversify financial risks, but there are also occasions, as happened this week with Gotham City Research and Grifols, in which they take sides with their opinions in the fall in value of the listed company. .
In the Spanish stock market, this week there were short positions open for almost 600 million euros in eleven companies, according to the records of the National Securities Market Commission (CNMV). They correspond to a dozen funds ranging from those specialized in the matter, such as Ako Capital, Otus or Point72, to the conservative and multifaceted investment giants, including the Canadian pension fund, JPMorgan or BlackRock. They all have their Anglo-Saxon origin in common because this operation is widespread in the United States.
In reality, the volume of these bets is small in Spain if compared to what it represents in other markets and with the capitalization of all those listed in the country, of 1.1 billion euros. It is also much lower than that recorded years ago, when the crisis left some companies at the expense of these opportunistic investors, who took positions of up to 10%. Now equities have been rising for months and it is not easy to predict falls.
CNMV sources explain that bearish investors are subject to a European regulation in which they are required to declare positions of more than 0.5% in listed companies and that there is no debate about their eventual prohibition, beyond the suspensions that They include the regulations for cases in which there is no “orderly negotiation” on the stock market.
Short positions currently do not exceed 2% of any Spanish listed company, except in Audax, where two bearish funds have leased 3.6% of the capital, valued at 21 million. The largest bearish position in terms of volume is that of 278 million euros of the Canadian pension fund and BlackRock in Telefónica, representing 1.3% of the capital.
The bears also have bets of 80 million in ACS for 0.73%, 77 million in Enagás for 1.9%, 64 million in Bankinter for 1.2% or 27 million in Fluidra for 0. 78%. Grenergy, Meliá, Solaria and Unicaja also have these uncomfortable stowaways on board in their capital. At Grifols, Gotham has already left in search of other destinations.
Market sources assure that short traders have a bad reputation in Spain, but that in the United States, as long as they do not spread false information, they have their uses and can even act as a “canary in the mine,” warning of corrections in worth. Some remain hidden in the company's capital for months waiting for them to go public. In their own way, they also have to earn a reputation, since a false report or position deteriorates their credibility in the market.
The CNMV has only suspended the activity of the bears on two occasions in anticipation that they could aggravate an already altered stock market negotiation. It was during 9/11 and in the worst months of the pandemic, between March and May 2020. Since 2012, the supervisor has required these operators to report their positions and has recently standardized the reporting criteria with those of the rest of the surrounding countries.
For Lydia Martínez, board member of the Association of Financial Investment Advisors (AIF), the case of Gotham and his activism in Grifols can generate “moral and ethical doubts.” In her opinion, the key is for the investor to have “a reliable system that guarantees” the veracity of the information transmitted to the market. “Market freedom must exist, but always audited by totally objective organizations,” she says.
The moral lesson may come from the market itself, in the form of campaigns to raise the value of companies besieged by bears. At the beginning of 2021, these opportunistic funds came out badly in their bet against the American video game company Gamestop. Investors grouped together through social networks to torpedo the short positions of bearish funds in the company, which, far from falling on the stock market, skyrocketed its price, causing losses of $6 billion to speculators.
From that episode the bassists seem to have learned the lesson that it is not a good idea to mess with the popular high school student. It is even better to operate through catchy names, like Gotham, taken from the Batman comics.
Added to these market reactions is the riskiness of the bearish bet itself, which often goes wrong. According to Bloomberg calculations, in 2023 they lost $195 billion worldwide with their ill-advised short positions, which adds to the red numbers also in 2020 and 2021. The only one in recent years in which they have done well It was 2022, when they obtained profits of 300,000 million. For now, the one whose latest move has turned out well is Gotham, which has left Grifols with a loot of around 20 million euros.
