Origo and Bodenholm’s XXL Shorts

Stockholm (HedgeNordic) – Since presenting a short bet against Norwegian sports retailer XXL to an online community of buy-side professionals in December last year, Carl Rydin and his team at Origo Quest 1 have been reaping the harvest from their bet. The retailer has lost two-thirds of its market value since Rydin submitted the short case to SumZero, with the retailer’s share price plummeting from its 52-week high of nearly NOK 97 reached in early 2018 to a current share price below NOK 26.

With his short case against XXL, portfolio manager Carl Rydin was among the finalists for the best shorts in the “Top Stocks Challenge” organised by SumZero, an online community for professional investors. The short case outlined several short- and longer-term issues the sports retailer confronted, including a structural shift in consumer shopping behaviour away from physical stores to online stores, a heavily indebted balance sheet, high inventory levels, expensive relative valuation, and costly expansion outside the Nordics.

Origo Quest’s short position in XXL has been very successful throughout the entire year, further helped by a 30 percent decline on Wednesday this week after the retailer issued a profit warning and announced the resignation of the chief executive officer who had been in the job only several weeks. Origo Quest 1, an equity-oriented hedge fund focusing on small-cap companies, has not been the only Nordic hedge fund shorting XXL though.

According to the public short sale register of the Financial Supervisory Authority of Norway (Finanstilsynet), Bodenholm Capital AB, which manages Europe-focused equity hedge fund Bodenholm, had a short position in XXL amounting to 0.7 percent of outstanding shares in mid-June (only short positions exceeding 0.5 percent of a firm’s outstanding shares are made public by the Finanstilsynet). Bodenholm’s short position gradually increased to nearly 2.0 percent of outstanding shares in late September and was reduced to below 0.5 percent by early November.

Carl Rydin’s short case can be found below: