BlackRock lends 46 million shares as shorts target Toshiba

Short interest stood at 8.6% of Toshiba’s free float on March 3

TOKYO: Buried in an obscure filing this week was another hint of the trouble faced by Toshiba Corp.

BlackRock Inc, the third-biggest owner of the embattled Japanese company, indicated in a report to the finance ministry that there’s been a huge increase in the stock it has out on loan.

The world’s largest money manager said about 46 million Toshiba shares owned by its units, or about one-fifth of its total stake, are temporarily being held by others. That’s up from just 1.4 million when it filed its last report in January.

BlackRock wasn’t available to comment.

Borrowed shares are mainly used in short selling, betting that a company’s stock will fall.

Short interest in Toshiba has surged since last month on speculation the company will be demoted to the second section of the Tokyo Stock Exchange or delisted, either of which would mean index funds would need to sell large amounts of the stock.

Short interest stood at 8.6% of Toshiba’s free float on March 3, one of the highest levels among companies in the Nikkei 225 Stock Average, according to IHS Markit data.

The average for stocks in the equity gauge was 2.3%. The cost of borrowing Toshiba’s shares is among the highest in the index, the data show.

Toshiba’s shares plunged 24% this year through Tuesday’s close, the biggest decline on the Nikkei 225, as the company reels from a US$6.3bil writedown in its nuclear business and seeks to sell assets, including its prized chip unit, to stay afloat.

Akira Kiyota, who heads the country’s main bourse, said last month that Toshiba faced three risks that could lead to delisting. The stock added 2.2% in yesterday trading in Tokyo.

For one brokerage, which had recommended being short Toshiba, the depth of pessimism is now overdone.

“It’s sentiment-driven,” said Amir Anvarzadeh, head of Japanese equity sales at BGC Partners in Singapore, who told clients last month to cover their Toshiba short sales.

Because it’s getting harder to borrow the shares, there’s a bigger chance of a short squeeze, he said. — Bloomberg