ADVERTISEMENT

Shares of High-Flying Battery-Maker Sink on Short-Seller Report

Shares of High-Flying Battery-Maker Sink on Short-Seller Report

(Bloomberg) --

The meteoric stock rise of German battery maker Varta AG met with a major bump on Wednesday as Commerzbank removed its buy recommendation, citing a report by an anonymous short seller of Chinese competitors moving into its market.

The stock, which almost quadrupled last year on speculation that Apple Inc. may be a big customer of the German company, fell as much as 24% in Frankfurt. The drop was the steepest since March 2011 and cut Varta’s market value to 3.8 billion euros ($4.2 billion). A large block of shares traded at a 13% discount to Tuesday’s closing price accelerated the decline.

Lowering his rating to hold, Commerzbank analyst Stephan Klepp referred to a report by “an active short seller” that Chinese peers have made headway with several key Varta clients such as Samsung Electronics Co., GN Store Nord A/S’s Jabra, Sony Corp. and Samsung’s JBL unit.

A spokesman for Varta said the company became aware at the end of December that two Chinese producers of coin batteries were infringing its patents and that it has taken legal action.

Shares of High-Flying Battery-Maker Sink on Short-Seller Report

While Klepp still sees the business “running from strength to strength,” he said the report caused him to evaluate “the current status of Varta’s sole supply proposition.”

Chinese competition seems to have arisen because Varta was unable to satisfy the high market demand from earbud clients, who “have been afraid to lose market share with supply from Varta only,” the analyst wrote in a note.

Varta told Commerzbank that it “neither lost traction with any of their clients nor lost any client” and the broker still expects the company to report a strong fourth quarter, Klepp wrote.

In an article published Tuesday on the Seeking Alpha website, an author using the name “Black Mamba” said it had found four Chinese competitors making batteries for so-called Truly Wireless Stereo earphones, and that two Varta customers are using batteries from other vendors. Black Mamba said it has a short position in Varta and that it’s not receiving compensation for the article, other than from Seeking Alpha. The article requires a subscription to access.

Black Mamba said in its Seeking Alpha profile that it has chosen to write anonymously. The short seller, which has 609 followers, has in the past published articles about its bearish bets on North American marijuana, chip and biotech stocks.

To contact the reporters on this story: Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.net;Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Paul Jarvis

©2020 Bloomberg L.P.