Selling Activision Short?
April 10, 2008 – 4:35 pm
In literary terms, when you sell something short, it means you don’t give it proper credit, attributing lesser value.
e.g., Ted’s description of Wanda’s moderate cuteness sold her short, for in fact, she was a bombshell.
In economic terms, “short selling” is when you sell shares of a company that you do not own, with the promise of purchasing them back at a later date. This strategy is used when you believe the value of the company’s shares will drop in value, allowing you to make a profit (see graph).
e.g., http://www.gamesindustry.biz/articles/short-interest-in-activision-rises-nearly-55
I haven’t played the stock market since grade 13 (yes, we had that in Canada way back when) Economics class when, as a project, we were given $100,000 of fake money from TD Waterhouse to play in a sandbox with real-world market dynamics. Even though our performance in this project would reflect in our marks, we weren’t exactly going to lose the shirts off our back by losing everything, so we played moderately aggressively. This was 1997-1998, and anyone familiar with the “dot com bubble burst” in 1999 should remember that companies like eBay, CNet, Yahoo, and Microsoft were soaring. I turned my $100,000 investment into $649,000ish by the project’s end, and short selling on the lamer dot com startups was a big part of my strategy. Oh, if only it had been real money… that would have been grand (until I probably would have lost it all when the bubble burst and jumped off the tallest building in my fairly short city).
Anyway, the point I’m trying to make in a very round-about way, is that most people who play the market, especially in the tech sector, know what they’re doing. Short selling isn’t something you enter into lightly unless you’ve got a massive bankroll to absorb the loss, so I don’t necessarily think this is a good sign for Acivision (Blizzard). You can’t argue that the company has been doing extremely well in 2007-08, but there has to be a reason for nearly 4% of the company’s shares being held short…
Reuters could not account for the increase in short interest, although it did make reference to the lawsuit between the company and Gibson over patents allegedly violated by Guitar Hero.
The Gibson lawsuit might have some people worried or, conversely, looking to make a quick buck from but maybe it’s their CEO’s totally ridiculous remarks of late. Maybe he’s done such a good job scaring people away from investing in anything competing against WoW, people are thinking that even includes new Acti-Blizzard products? Your guess is as good as mine…
