The Sunday Times’ Sam Chambers asked why so many investors were betting against exploration and production company Premier Oil?
In his Inside the City column over at the Times, Chambers pointed out that more than a fifth of the FTSE 250-listed firm’s 831 million shares were out on loan, according to IHS Markit, making it the most “shorted” stock in the index.
However, he said things might not be quite as bad as they seem to be.
“Almost three-quarters of those positions are banks borrowing stock to hedge their exposure to Premier Oil,” said Chambers.
Chambers did warn that Premier needed to protect itself after having sold investors contracts for difference, financial instruments that allow speculators to bet on the direction of a company’s share price without actually owning any stock.
He said it appeared that Premier Oil had become somewhat of a “quasi-casino” as its shares were highly correlated with the price of oil, often moving more dramatically than the commodity price itself.