(Bloomberg) — Globe Life Inc.’s record decline this week extended the winning streak of the short-seller group, which released a report against the insurance company.
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Fuzzy Panda Research, an anonymous organization that publishes reports on companies whose stocks they bet on, was the most active short seller in 2023, according to a Breakout Point analysis of companies that made at least two calls. It was found that the Companies shorted by Fuzzy Panda fell by an average of 63% last year.
Globe Life’s record-breaking 53% plunge on Thursday contributed to a successful start to the year for Fuzzy Panda, with shares of all three companies the company has reported on down so far in 2024. Tough environment for short sellers driven by the Meme stocks wave in 2021 and are struggling with a bull market.
“Even though Fuzzy Panda isn’t as well-known as Muddy Waters, Gotham City or Hindenburg, their track record is one of the most impressive,” said Breakout Point’s Ivan Cosovic, the founder of the Düsseldorf-based data tracking company. “This has made her almost an insider tip in the activist short seller community.”
Fuzzy Panda did not respond to a request for comment from Bloomberg News.
Globe Life criticized the report – in which the short seller claimed it “uncovered extensive insurance fraud allegations that were ignored by management” – and said it would explore its legal options. The company’s shares rose as much as 25% on Friday before paring back the advance.
“We have reviewed the report and found that it is completely misleading and mixes anonymous allegations with recycled points made by plaintiff law firms in an attempt to force Globe Life into settlements,” the company said in a statement.
Still, the report appeared to raise concerns among shareholders, with the company confirming in March that it had been subpoenaed by the U.S. Department of Justice.
“With the recent disclosure that the DOJ has issued a subpoena to the company to investigate some of these allegations, we believe this has created significant uncertainty for shares,” Evercore ISI analysts led by Thomas wrote Gallagher in a statement Thursday.
He maintained his inline rating but lowered his price target on the company from $125 to $75 to reflect uncertainty about how the situation will evolve and whether Globe Life will face penalties
Read more: Why activist short sellers are sparking controversy: QuickTake
Analysts at Keefe, Bruyette & Woods said that while they believe Thursday’s decline was exaggerated, near-term uncertainty is a concern.
“If the allegations are true (very unclear), it would likely result in financial penalties, significant disruption to AIL sales and reputational damage,” analysts led by Ryan Krueger wrote in a note Thursday, maintaining their price target and market performance rating at $130 -dollars at . He added that there were no allegations against the rest of Globe Life distribution, which should limit some potential fallout.
Not all of Fuzzy Panda’s targets have collapsed since the short position announcement. Red Violet Inc., which the group shorted in 2018, has enjoyed a strong run in recent years, and BioDelivery Sciences International Inc., which Fuzzy Panda said was shorted in 2019, was purchased by Collegium Pharmaceutical Inc. in 2022. Likewise, the short bet in 2018 Terra Tech Corp. merged with Unrivaled Brands Inc. in 2021
But recent declines in the stocks targeted by the reports have drawn increasing attention.
“Fuzzy Panda has been active since 2018, but experienced a period of reduced activity from 2019 to 2021,” Cosovic said. “Their following has grown significantly in 2022 and 2023, along with their impressive track record over these years.”
– With assistance from Katrina Compoli and Bre Bradham.
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