Short sellers emerge as Cue Energy returns to NZX

Tuesday 10th November 2009

Cue Energy Ltd, the oil and gas explorer whose ASX-listed stock has soared 70% in the past three months, attracted so-called short sellers when it returned to the New Zealand stock exchange, according to NZX data.

More than 39% of the 1 million Cue shares traded last month were short sold, NZX said in a statement. The shares have fallen 5.9% since their debut on Oct. 21 and last traded at 32 cents. Short sales in November were valued at $130,000.

Short sellers bet on a decline in a stock, borrowing the securities to sell in the expectation they can buy them back more cheaply later and pocket the difference. The total value of short sales slumped 61% on the NZSX to $4.33 million in October from a month earlier, while volumes shrank 19% to 2.99 million shares.

Gold miner Heritage Gold NZ Ltd. had the most shares short sold with 545,000, up from 25,000 a month earlier, making up 9.7% of the total shares traded in the company, while Contact Energy Ltd., the country’s largest listed power company, had the most value sold short at $997,000, or 2.2% of its total monthly value traded.

Short-selling shares came under scrutiny in the wake of the collapse of Lehman’s Brothers last year, and prompted regulators to crack down on the practice.

America’s Securities and Exchange Commission followed Britain’s lead in banning short sales on specific financial stocks in a bid to improve financial stability. Australia imposed the world’s strictest ban, prohibiting any short selling across all the 2,600-odd stocks on the ASX bourse.

New Zealand decided against joining the prohibition, and since then, the ban has been lifted in many, but not all, countries that imposed it.

Telecom Corp., the country’s largest phone company, saw the value of short-sold shares plummet to $426,000 in October from $5.5 million, making up some 0.1% of its total trades.

Businesswire.co.nz

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