By Devanesan Evanson
THERE is a new game in town whereby some retail investors have decided to take on institutional investors who short certain shares.
In “bursabets” – a new subreddit on social news aggregator site Reddit – Malaysian retail investors have been discussing buying up stocks of glove makers. Their issue is that the share prices of glove companies having dropped in recent months despite the increasing profits reported by these firms.
The retail investors are looking to buy shares of medical glove makers in an attempt to drive up their prices and counter the short sellers who tend to drive the prices down.
In short, they are inspired by the recent David vs Goliath battle in the US firm GameStop Corp.
Shares of GameStop have surged 1,700% in just two weeks as the Main Street piled in and forced hedge funds like Melvin Capital Management to lose billions on their short positions. These small investors discussed stocks on the “wallstreetbets” forum on Reddit anonymously while fuelling the GameStop rally.
Locally, share of glove makers such as Top Glove Corporation Bhd jumped 14.33% to intraday high of RM7.10 on the morning of Jan 29 from its closing price of RM6.21 on Jan 27.
At the same time, share price Hartalega Holdings Bhd rose 10% to intraday high of RM13.42 as compared to the closing price of RM12.20 Jan 27.
The Minority Shareholders Watch Group (MSWG) would like to advise minority shareholders to exercise diligence and be aware of the risks involved in such initiatives.
Generally, institutional investors tend to have deeper pockets. This is not to underestimate the retailers’ purchasing power. At the end of the day, it may become an issue of who has deeper pockets and the stamina to sustain their initiatives.
Secondly, there may be some unscrupulous retailers including “stock market gurus” who may unload their shares after having encouraged other retailers to drive up the share prices.
The Securities Commission (SC) has constantly warned members of the public against dealing with unlicensed investment advisers as they could be defrauded or used as part of a market manipulation scheme.
Eventually, such action by both parties in trying to counter each other will create volatility in the share prices and this may be a risk to the short-term investors.
As always, minority shareholders should consider this new game in town and make informed decisions according to their risk appetites. – Jan 29, 2021
Devanesan Evanson is the CEO of the Minority Shareholders Watch Group, an independent research organisation to encourage good governance among public listed companies with the objective of raising shareholder value over time. He can be reached at [email protected].
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
