Philip Elmer-DeWitt over at Apple 2.0 had an interesting post today talking about why Apple’s share price took such a beating in April. Elmer-DeWitt pointed out a column by Canadian money manager and financial columnist Mal Spooner in which he describes a burst of short selling between April 2012 and April 2013.
Short-selling is the brokerage practice of selling stock that you don’t own, betting that the price of the stock will drop. The short selling of AAPL that started last April was described by Spooner as being like swarming, where an “innocent bystander is attacked by several culprits at once.”
At the time Spooner wrote his column in early April, things were quite bad for Apple. Short interest in Apple had climbed from 8 million shares in April of 2012 to 20 million in April 2013. During the last two weeks of April 2013, short interest doubled again to 41.6 million shares — and that’s when Apple’s share price fell to $385.10 (it’s currently hovering around $444 – $450).
Spooner’s comment in early April points out how unethical the practice of shorting a valuable stock really is:
“I’ve never claimed to be all that smart, but I just can’t figure out how aggressively attacking a company’s share price, selling stock that the seller doesn’t even own, for the sole purpose of transferring the savings of innocent investors into one’s own coffers… is a noble thing. Isn’t it kind of like a bunch of thugs beating someone up and stealing his/her cellphone declaring it was the loner’s own fault for being vulnerable?”
The bears are still shorting AAPL, but the short interest has fallen to 26 million shares in just two weeks. For Apple, hopefully that’s a sign that shares may recover some of their value in the future and that the muggings are over for the time being.