BlackRock and Norway give ammunition to the bears by lending Ibex shares for one billion

The attack by Gotham City Research on Grifols and the emergence of Saudi Telecom Company (STC) on Telefónica have brought to the surface a significant activity for the markets that normally develops stealthily in the pipes of the financial system: the lending of company shares quoted.

These assignments allow bearish investors to carry out their operations: they take the borrowed securities, sell them quickly in the market and trust in a drop in prices to repurchase them cheaper when it is time to return them. This is what Gotham did at Grifols in January.

It also allows you to quickly take stakes in companies without shaking up stock market prices much: part of the Telefónica shares raised by STC in September 2023 were initially borrowed through Morgan Stanley.

For these transactions to take place, there must be an investor who acts as a lender. This operation is triggered on dividend payment dates, since some shareholders transfer their securities for a few days to avoid collecting remuneration, normally for tax reasons.

Another reason for lending is that stable shareholders want to get a return on their securities (in addition to the potential stock market appreciation or dividends), lending them temporarily in exchange for interest.

Several of the large foreign investors in the Spanish stock market are among the entities that lend shares of the large Ibex 35 companies. Two of the most prominent, BlackRock and the Norwegian sovereign fund (Norges Bank Investment Management), have securities borrowed from the Spanish listed companies for around one billion euros, according to the latest statements to the National Securities Market Commission (CNMV).

The American giant BlackRock adds shares lent for 932 million euros, including in groups such as Santander, BBVA, Iberdrola, ACS and CaixaBank. But the company in which a greater percentage of the capital has been assigned (almost 1.5%) is Grifols, one of the Spanish firms with the most activity of bearish short sellers.

Norway, for its part, has borrowed almost 1% of Solaria, and a small block of shares in Unicaja. The number of companies in which you have lent shares may be greater, since there is only an obligation to report shares to the CNMV when they exceed 3%.

Other large international funds also provide shares to bears or other investors. This is the case of Capital Research at IAG and BBVA (it also did it last month at Grifols); Invesco on Amadeus and Solaria; T Rowe at Fluidra; Fidelity in Indra and the Singapore entity GIC in Cellnex.

In Applus, banks such as Morgan Stanley and Jefferies have lent shares, surely to provide coverage for hedge funds that are betting on price increases in the outcome of the takeover battle for that company.

Market sources explain that it is usual for large funds to lend only a small portion of their total holdings, with the aforementioned objective of generating some return. A hedge fund or short seller that takes these securities can pay interest of more than 10%.

The dilemma arises when the investor lends shares in companies subject to attack by bearish investors, such as Grifols. If a substantial number of securities are sold, the investor may be throwing stones at his own roof by facilitating an avalanche of short selling that depresses the price of the shares.

In the case of the pharmaceutical company, according to data from S

Short sellers, for their part, suffer the risk of a rebound in the stock they have sold short, since they have to buy it back at a higher price to return it to its original owner.

In the end, investors like BlackRock play a delicate game by balancing the interest they receive for lending the shares, the expectations of the price and the volume of securities that, if sold, can move the price negatively. From the market they point out that, for listed companies, having an intense operation of securities on loan is positive to attract shareholders who want to have that option.

Although the attention of the bears seems focused on Grifols, it is not the Spanish company with the most shares on loan today. According to data from S

Behind those listed companies, Solaria and Grifols appear as the firms with the most borrowed shares, around 5% in each case.

In the case of Solaria, BlackRock itself (which again acts as a lender), Squarepoint and Helikon Investments have borrowed more than 0.5%, a percentage above which must be reported to the CNMV.

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The ACS and Acciona Energías Renovables groups, for their part, have around 4% of the capital on loan. The bears Millennium International Management and AKO Capital have each shorted more than 0.5% of the company chaired by Florentino Pérez.

AKO Capital, along with Kintbury Capital and Fosse Capital Partners, appear among the bears of Fluidra, a firm where the bears have borrowed 3.68% of the capital, according to S

In Unicaja, a bank with 2.6% loaned, the Capital Fund Management firm has sold 0.5% short.