Bloomberg News

Vestas Plunges as Short-Squeeze Rally Ends: Copenhagen Mover

February 07, 2012

Feb. 6 (Bloomberg) -- Vestas Wind Systems A/S, the world’s biggest wind turbine maker, fell the most in a month as investors who bought shares to honor so-called short contracts left the market and after ING Groep NV cut its price estimate.

Vestas fell as much as 8.1 percent, making it today’s biggest loser in the Copenhagen 20 Index, and declined 3.1 kroner to 71.35 kroner at 11:05 a.m. in the Danish capital. The Aarhus, Denmark-based company has lost 61 percent of its market value over 12 months after slashing sales and profit forecasts.

Vestas jumped 14 percent on Feb. 3 after investors bought shares to cover their short positions ahead of the Feb. 8 earnings, said Mads Zink, head of equity sales trading at Danske Bank A/S. In a short transaction, investors borrow and then sell a security in anticipation of a decline in its value before repurchasing the asset. Vestas shares remain overrated as the company’s customers face higher costs and Vestas battles increased competition from China, Maurice Rosenthal, an analyst at ING, said today.

“It rose too much on Friday,” Zink said by phone today from Copenhagen. Today’s drop is “a natural correction to the extreme climb in the last hour of trade last week, which was triggered by rumors of short covering.”

ING’s Rosenthal, who’s based in Brussels, cut his price estimate on Vestas shares to 55 kroner from 65 kroner. He repeated his “sell” recommendation in a note to clients today.

Short interest in Vestas reached 19.5 percent of shares outstanding as of Feb. 2, according to the most recent figures available from Data Explorers. That’s down from a record high of 22 percent on Jan. 19. Most companies have about 3 percent short interest in their stock, according to Data Explorers.

Won’t Step Down

Vestas Chairman Bent Carlsen has no plans to step down or change the management, newspaper Berlingske quoted him as saying in an interview yesterday. The industry is facing challenges and investors shouldn’t confuse a bad market with bad leadership, Carlsen said, according to the Copenhagen-based newspaper.

Members of Vestas’ executive management team last month held meetings to discuss the performance of Chief Executive Officer Ditlev Engel, Borsen reported Jan. 30, citing sources close to the talks that the newspaper didn’t identify.

A third of U.K. Prime Minister David Cameron’s Conservative Party lawmakers have signed a letter urging him to cut subsidies for onshore wind farms in favor of other renewable energy sources, according to a report yesterday.

Vestas will publish fourth-quarter earnings and provide a forecast for 2012 on Feb. 8 at 8:30 a.m. Danish time. The company published some preliminary figures on Jan. 3 saying earnings before interest and tax for 2011 will be about zero.

--With assistance from Gelu Sulugiuc and Peter Levring in Copenhagen. Editors: Tasneem Brogger, Frances Schwartzkopff.

To contact the reporter on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net

To contact the editor responsible for this story: Tim Quinson at tquinson@bloomberg.net.


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