It sure seems odd that a report of surging short selling could have more of an effect than the actual short selling. The price moved up from $17 to $27 during the past month while the selling was taking place, yet fell only after the short interest was announced. Go figure.
Ron
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January 25, 2001
Dow Jones Newswires
XO Commun Dn 10% After Short Interest
Surge Published
Dow Jones Newswires
By Christine Nuzum
Of DOW JONES NEWSWIRESNEW YORK -- Bearish research notes, a hefty monthly short
interest
number, and a stock offering by a competing company all converged to bring
shares of XO Communications Inc. (XOXO) down sharply Thursday,
analysts and fund managers said.
Monthly short interest data published in Thursday's edition of The Wall Street
Journal showed that short interest (short sales which haven't been closed out)
in XO rose 75% to 24 million shares, one of the largest increases of any
stock.
The sharp climb in XO's short interest was largely due to hedge fund
managers who bought the company's convertible bonds after a recent offering
and sold the stock short to lock in gains.
Wednesday afternoon, ABN Amro initiated coverage of XO with a hold
rating - an unusually tepid recommendation for a sell-side analyst. In a
research note, ABN Amro analysts said they were bullish on the company's
business, but that its reliance on debt and its heavy projected losses don't fit
with ABN Amro's standards for recommending stocks. The analysts
suggested investing in XO's convertible bonds as a more conservative play.
Nervousness about whether the Federal Reserve will cut interest rates again
may also be hurting XO's stock, said Merrill Lynch analyst Shannon Cross.
"Of the top four carriers within the group, XO is the one that still needs cash,"
she said, adding that some would argue that its need for funding makes XO
Communications the most sensitive to interest rates.
Thursday, stock market watchers have been looking for a hint on interest
rates as Federal Reserve Chairman Alan Greenspan speaks before the U.S.
Senate.
Time Warner Telecommunications Inc.'s (TWTC) secondary offering of 6.5
million shares Thursday may have put some pressure on the stocks of XO
Communications and its peers, said one analyst, who declined to be named.
He said that fund managers might be selling shares of companies like XO
Communications and McLeodUSA Inc. (MCLD) to make room in their
portfolios for the new Time Warner Telecom shares.
But Dean Kartsonas, a portfolio manager at the Federated Communications
Technology Fund, said that Time Warner Telecom's stock is liquid enough
that fund managers can buy shares when they want to and don't need to sell
other stocks on the day of a secondary offering.
Kartsonas said that a bearish forecast on Winstar Communications Inc.'s
(WCII) fourth quarter by Kaufman Brothers put pressure on XO
Communications' stock Thursday.
Analysts from Merrill Lynch and Morgan Stanley also cited profit-taking, that
XO Communications' stock has risen more than 30% in the last month. |
