(Bloomberg) -- Short sellers are zeroing in on Swedish accounting software company Fortnox AB after the sudden resignation of the chief executive who oversaw a huge rally in its shares.
The percentage of Fortnox shares out on loan — a common indicator of short interest — has almost doubled since Aug. 13, when the departure of CEO Tommy Eklund was announced. As of Wednesday, shares out on loan represented about 8.7% of Fortnox’s free float, data from S&P Global Market Intelligence show.
News of Eklund’s exit — for which no reason was given — has likely unnerved investors, according to Carnegie Investment Bank AB analyst Predrag Savinovic. It got “capital markets wondering if something is going on in the business, that there was an event that triggered this,” said Savinovic, who has a buy rating on the stock.
Fortnox declined to comment on the reasons behind Eklund’s departure, and referred to the press release announcing his resignation.
Eklund took the helm of Fortnox in January 2020 and oversaw a period of rapid growth, fueling a near fourfold increase in the shares during his tenure. The company operates only in Sweden, serving more than 550,000 customers, most of which are smaller businesses.
In recent quarters, organic growth has slowed from levels exceeding 30%, standing at 25% in the first half of 2024. The shares have also faltered, falling by a quarter from their March closing peak, including a 14% drop on the day that Eklund’s departure was announced. He remains available to the company during “a transition period.”
Related: Fortnox Falls; FT Reports It Has Restated Market Share Data
“Even though the company’s reports are still very positive, there is evidence its core business is indeed slowing down,” said Bharath Nagaraj, an analyst at Cantor Fitzgerald LP who has an underweight rating on the shares. “Short sellers might think the CEO leaving right now could be a sign that it is actually slowing down,” he said in e-mailed comments.
The funds that have disclosed short positions in Fortnox this month include Psquared Asset Management, Qube Research & Technologies, Kintbury Capital and Gladstone Capital Management. The stock is in the top 40 of most-shorted companies in the Stoxx 600 Index, the S&P data show.
Among analysts, Fortnox polarizes opinion. Eight have a buy or equivalent recommendation, while three advise selling. There are no hold recommendations, data compiled by Bloomberg show.
Carnegie’s Savinovic is among the bulls. He has a price target of SEK80, a third higher than current levels, predicting a positive earnings surprise on a view that the firm’s payment card — due to be launched this quarter — will enjoy high demand with customers.
Yet Cantor Fitzgerald’s Nagaraj says the group will need to spend more to ramp up cross-selling products at a time when its core business is growing more slowly than in the past. His price target of SEK40 is the lowest of any analyst tracked by Bloomberg and implies a drop of more than 30% from current levels.
--With assistance from Lisa Pham and Jonas Ekblom.
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