Short-Sellers Show Fondness for TCI Shares : Telecommunications: Technology stocks may remain volatile as interactive competition heats up.
Investors who bet that a stock is going to fall have renewed their interest in Tele-Communications Inc., which many expect to see at the center of the interactive information revolution.
Shares of the largest U.S. cable TV company had the biggest increase in so-called short positions of any firm last month on the NASDAQ market--though its name remains far down on another list that measures short-sellers’ fervor.
A handful of famously volatile technology issues, notably Intel Corp. and Dell Computer, also figure prominently on that list.
In short-selling, an investor sells borrowed shares of stock. If the stock’s value falls, the borrowed shares can be replaced with others purchased at a lower price.
Analysts played down the significance of short-selling in TCI shares, noting that cable companies have long been popular with some short-sellers. They also noted that most short-selling now is done as part of a complex hedging strategy, so it is not unusual for a highly valued firm with many outstanding shares to have significant short positions.
Technology stocks have also been popular with short-sellers, because they often rise and fall dramatically. Dell, for example, traded at nearly $50 a share within the last year and later plummeted on concerns about tight profit margins and mismanagement of a new notebook computer line.
Intel’s stock also has soared and plunged in reaction to rulings in a critical copyright lawsuit and shifting projections about the market for personal computers.
Denver-based Tele-Communications Inc. has been “a favorite of short-sellers on occasion,” said Michael Kupinski, an analyst with A. G. Edwards & Co. He attributed the 50% increase in the TCI short position over the past month to concerns about the Federal Communications Commission’s move to roll back cable TV rates.
Kupinski noted that cable stocks held up well just after the FCC’s decision in April, and said some money managers may now be hedging their investments in cable. Short interest in Comcast Corp., another large cable concern, also jumped last month.
TCI, now trading at about $22 a share, down slightly from a 52-week high of $25.50 a share, hopes to make its cable systems the centerpiece of the new interactive information networks, which will offer a plethora of services such as movies “on demand,” multiple-player video games and sophisticated shopping services.
The plans will require billions of dollars in new investment, and the cable companies will compete with telephone companies and new satellite TV ventures.
But the financial implications of these new projects will not become clear for some time, and analysts said they were not a significant factor in any short-selling of TCI.
“These days, one never knows if a short is a short or if a short is a hedge,” said Charles Biederman, editor of the newsletter Market Trim Tabs. “Managed short funds have shrunk significantly in the last few years, and they’re not really a factor.”
One important indicator of short interest is the “cover ratio,” which charts the short position against the number of shares a firm has outstanding. By that standard, neither TCI nor any of the other technology stocks appears to be especially significant as a target of short-sellers.
