Many stockowners are now betting on Fiat SpA’s shares taking a steep dive – triggered by the inability to complete the much anticipated merger with its US subsidiary, Chrysler Group LLC.
Markit, a supplier of financial information, says that for the Italian automaker the short interest – which is the stock borrowed then rapidly sold in the bet its price would soon fall – has risen to a peak level. The carmaker’s investors are faced with the worst slump in the stock price since November 2011 and should expect even more volatility, according to industry experts.
“This is self-fulfilling: When you see more people shorting Fiat, then you are more inclined to short it yourself,” said Nicola Marinelli, who helps manage $222 million at Sturgeon Capital Ltd. “There could be some crowd psychology behind this, and it may be a very volatile period for the stock.”
The company’s stock collapsed 17% since the August 1 shareholders meeting where the merger between Fiat and Chrysler into Fiat Chrysler Automobiles was approved with a two-thirds majority. The concern is that the plan could fall through if many of the opposing stakeholders exercise their right of selling back the stock to Fiat as dissenting investors. The deal would crumble if the buy out reaches a 500 million euros threshold.