Photographer: Freya Ingrid Morales/Bloomberg

Things Could Finally Be Looking Up for Pandora

Updated on
  • Hedge fund Maverick has cut its short bet twice in six days
  • SEB says first indication of easing pressure but early days

After a speculative attack this year wiped a third off its market value, there are signs things may finally be looking up for Pandora A/S.

Shares in the Danish jewelry maker jumped 6.3 percent on Tuesday, the most since July, following news that Maverick Capital is scaling back its short bet against the company. AQR Capital Management has also cut its short bet, according to a regulatory filing on Wednesday.

Pandora is now planning to give investors a sneak peak of its fourth-quarter numbers before its capital markets day.

“When we publish the trading statement before the capital markets day, investors can expect to get insight into Pandora’s revenue for all of 2017,” spokesman Martin K. Nielsen told Bloomberg. “The rest of the information about the 2017 accounting year won’t be made public until our full-year earnings report,” which is due to be published on Feb. 6.

Nielsen said the company hasn’t yet decided whether to make publishing trading statements before quarterly earnings a regular thing. It also hasn’t set a date for the trading statement, beyond saying it will come before the Jan. 16 capital markets day.

“We’re choosing to publish revenue data for 2017 in January to avoid that possible speculation regarding our 2017 performance overshadows our capital markets day,” Nielsen said. Pandora Chief Executive Officer Anders Colding Friis indicated Nov. 7 the company was considering providing some fourth-quarter information before the investor day.

The decision was greeted positively by a market that’s at times been dominated by concerns Pandora wasn’t being transparent enough.

“It makes sense that Pandora wants to put speculation about the fourth quarter to rest before the capital markets day,” said Soren Lontoft Hansen, an analyst at Sydbank.

Meanwhile, Google searches on Pandora and its products are recovering, which may indicate better fourth-quarter sales, Jyske Bank said in a note on Wednesday, repeating a strong buy recommendation on the stock.

“Pandora’s U.S. sales development has been in line with the development in Google searches” in the past, Jyske analyst Frans Hoyer said. “No one would thank us for wrongfully ignoring it.”

“The market is reacting to what may be the first sign that the pressure from the short sellers is easing,” Kristian Godiksen, an analyst at SEB in Copenhagen, said by phone on Tuesday. “It’s clear that at some point the short sellers will exit their positions and when that happens there’s normally an upwards reaction in the share price -- but it’s too early to say if we are at that stage now.”

The latest available aggregate data still show considerable short interest in Pandora. Bets against the company rose this month to almost 13 percent of the share capital, from about 1 percent at the start of the year. Hedge funds have been betting the jewelry maker will suffer from weak shopping-mall traffic in the U.S., Pandora’s biggest market.

On Tuesday, a filing to the Danish FSA showed that Maverick Capital cut its short position to 0.86 percent of the share capital, down from 0.97 percent in a Nov. 22 filing and from 1.31 percent on Nov. 7.

“It’s the first indication that short interest is declining, but it’s too early to draw any clear conclusions,” Godiksen said. “It’s not unlikely that short positions will come down in December, but it could easily also go the other way if some hedge funds believe Pandora will disappoint with the 4Q report.”

Maverick declined to comment via an email sent on its behalf by a communications firm. Pandora doesn’t comment on its share price or short positions, Nielsen, the company spokesman, said.

Short bets by hedge funds have contributed to Pandora losing about one third of its market value this year despite analysts overwhelmingly recommending clients buy the stock. It’s one of 2017’s biggest decliners and most undervalued companies in the Stoxx Europe 600 Index.

“A good argument for the short sellers to start their exit would be that they have now made a lot of money on their positions and see limited further downside potential,” Godiksen said. “So perhaps they see this as the time to move on.”

— With assistance by Nick Rigillo

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