Investors are swarming to bet against the fortunes of Japan’s Takata Corp. as the US regulators are asking for the company to expand its regional airbag recall to a nationwide level.
The National Highway Traffic Safety Administration has threatened with sever penalties if the Japanese auto safety parts producer doesn’t comply with an order to expand what so far was just a regional series of recalls. Around 10 million vehicles in the US have been recalled in 2013 and 2014 campaigns because of defective airbags, mostly in humid regions – believed to influence the faulty part. The airbag’s inflator could explode with too much force, sending metal debris and shrapnel flying at high velocity inside the cabin.
Just as the NHTSA demands the widened recall and the US Congress prepares to further scrutinize the defects that have been linked to five deaths globally (four in the US), short sellers that bet Takata’s stock price would further fall have reached record trading on November 19. Short selling relates to borrowing shares and selling them in expectation that the stock can be then purchased again at a much lower asking price. Takata has already dropped at least 50% throughout the year, but investors further wager the stock would plunge after the company would be faced to expand the recall to millions of other cars.