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

ASOS shares slid after a short seller nicknamed the ‘dark destroyer’ warned the fashion brand will need to tap investors for fresh funds.

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

That means almost 11 per cent of the company’s stock is out on loan to short sellers, which will make money if its share price falls.

Alongside Asos, ShadowFall has targeted Boohoo (up 0.8 per cent, or 0.42p, to 52.42p), magazine publisher Future (down 0.4 per cent, or 5p, to 1120p) and was among the first to uncover financial flaws surrounding the fraudulent payments processor Wirecard. 

It comes as fears are mounting over whether Jose Antonio Ramos, who was appointed chief executive of Asos in June last year, can do enough to cut costs and slash inventory.

David Reynolds, analyst at wealth manager Davy, said that the Asos boss still has his work cut out. 

He said: ‘The challenge being to “refresh” the business model and at the same time manage a somewhat stressed balance sheet, the ShadowFall view, being the same as ours, that that will be difficult and that the company will need to raise further capital.’

Russ Mould, investment director at broker AJ Bell, said Asos ‘failed to fix the roof while the sun was shining’.

He said: ‘Online retail had a good thing going during the pandemic. People had lots of disposable income, there was nowhere else to buy clothes and the thought of braving a queue at the post office meant people were put off from making returns, which are such a costly part of doing business. 

Now a lot of those factors have reversed, household budgets are tight, returns are easier to make and physical retail is now an option.’

Stock Watch – React Group

Shares in React Group rose more than 4% after it made record revenues.

The AIM-listed cleaning company, which removes graffiti, clears up damage caused by floods and tidies up residential and commercial properties, reported revenues of £9.3million in the six months to March 31.

This was up on the £5.1million it made during the same period a year ago. And its profit more than doubled to £2.5million.

Shares surged 4.3 per cent, or 0.05p, to 1.2p.

Shares fell 4.5 per cent, or 35.2p, to 749.2p. The company is valued at almost £750million. Two years ago, Asos traded at more than 5000p.

The FTSE 100 barely shifted yesterday, inching up 0.02 per cent, or 1.93 points, to 7912.2 and the FTSE 250 slipped 0.22 per cent, or 43.07 points, to 19226.94.

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

Last week the asset manager confirmed press reports that it was in talks with Zurich-based GAM to combine the pair’s investment management businesses. Shares slid 1.1 per cent, or 9.5p, to 831.5p.

Trainline rose highest on the mid-cap index after broker UBS raised the online rail ticketing firm’s rating to ‘buy’ from ‘neutral’. Shares powered ahead 5.6 per cent, or 13.4p, to 253.4p.

Likewise, Dunelm made gains following two positive broker upgrades. The home furnisher was raised to ‘buy’ from ‘hold’ by Stifel, which also lifted the target price to 1270p from 1250p.

And RBC hiked Dunelm’s target price to 1300p from 1250p. Shares rose 1.5 per cent, or 17p, to 1160p.

Business looked bright for Card Factory after it issued its third profit upgrade since mid-November. 

The greetings card and gift retailer said it made at least £52million of profit for the year to January 31. This was ahead of its previous forecast it gave in January of around £48million.

Card Factory had expected to publish its full-year results today but will do so on May 3 after KPMG requested more time to complete its audit. Shares soared 10.4 per cent, or 10.6p, to 112.6p.

Zillah Byng-Thorne, incoming chairman of M&C Saatchi has bought 143,536 shares in the advertising giant at an average price of 174p ahead of her arrival on June 15. That meant she held a 0.12 per cent stake in M&C. Shares slid 0.9 per cent, or 1.5p, to 171p.