Going short
Fast and loose lending at Axos
Good morning, diligent analysts. This is your Stock Market Rundown for June 12th, 2024. Thanks for joining me. Let’s dig in:
TODAY’S TOP STORY: UNDERWRITING UNDER FIRE
Banking, if you do it right, is a boring industry. Unlike investment bankers who slave all weekend, commercial bankers typically enjoy a Sunday afternoon of golf with a key client.
But sometimes boring turns into controversial. This week, well-known short seller Hindenburg Research disclosed a short position in Axos Financial, a Las Vegas-based bank holding company—meaning they’ve made a bet the stock will plunge.
Hindenburg charges that Axos’ management is guilty of sloppy underwriting. They say Axos is underestimating loan losses as much as the average Costco shopper underestimates how much they’re going to spend on a store visit. (But honey, that patio set was such a good deal.)
What’s more, Hindenburg pointed out that Axos has big exposure to the commercial real estate market, which is looking mighty shaky right now. Rising interest rates have caused spiking numbers of distressed property loans, especially in the office market.
Axos fired back on Hindenburg’s claims, dismissing the report’s allegations as “misleading, incomplete, and false.” Which is, well, exactly what you’d expect them to say.
When it comes to lending, though, you can’t hide from bad underwriting forever. Only time will tell whether whether Axos can hack their way out of this sand trap.
SO WHAT ELSE IS GOING ON?
Sometimes a staycation fits the budget better than a five-star resort. Hotel room demand fell as inflation hammered households across the US.
Layoffs watch: Microsoft’s revenue outlook must be partly cloudy—it’s laying off hundreds of employees at Azure, its cloud computing business.
Get your eggplant and peach emojis ready: X, the social media platform formerly known as Twitter has said it will allow adult material.
You’ll soon be paying more to enjoy the death metal playlist you curated: Spotify is jacking up monthly subscription prices. Worth it to enjoy Cannibal Corpse ad-free.
Until next time, esteemed partners; looking forward to tomorrow morning’s rendezvous. Yours in capitalism, The Axe
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