TOKYO (Bloomberg) -- Investors are piling into bets against Takata Corp. as the U.S. pushes for nationwide recalls to replace its faulty airbags and members of Congress prepare to renew their scrutiny of defects linked to five deaths.
Wagers by short sellers that Takata’s stock price would decline reached a record on Nov. 19 -- and have remained near that level -- after the U.S. auto-safety agency demanded Takata expand regional campaigns that have been limited to high-humidity areas. A short sale refers to borrowing shares and selling them in expectation that the stock can be bought back at a lower price.
Investors are betting Takata has further to drop after plunging more than 50 percent this year, as the National Highway Traffic Safety Administration threatens to levy fines unless the company magnifies recalls already affecting almost 8 million U.S. vehicles. Takata had said its liabilities were difficult to estimate even before mounting lawsuits, a federal grand jury subpoena and increased oversight by Japanese regulators.
“Serious, long-term investors do not want to have anything to do with Takata shares at this point,” Koji Endo, an analyst at Advanced Research Japan, said by phone. “Many of the investors whom I’ve met in the last couple of weeks think Takata might have to seek some financial aid. Even if the company doesn’t go bankrupt, they’re probably going to be in trouble from a financial aspect.”
Takata spokesman Alby Berman said he couldn’t immediately comment.
Regulators are scrutinizing Takata air bags after four fatal accidents linked to the devices in the U.S. and the death of a pregnant woman in Malaysia in July. The first known death outside the U.S. underscored the threat of the crisis spreading overseas. Japan has stepped up its oversight by forming a group to monitor recalls and coordinate with NHTSA.
Cheap shares
Matsui Securities Co. has seen significant increases in both short and long positions in Takata shares since Sept. 30, Managing Director Akira Warita said in an email.
Many investors “believe that Takata is cheap” and its stock price will recover, he wrote.
Takata shares have plunged about 56 percent this year, compared with a 10 percent gain for the benchmark Topix index.
Takata faces a deadline today to respond to 36 questions NHTSA posed in a special order one month ago. The queries relate to the company’s quality control, factory conditions and investigations into defect reports. Takata would have to pay fines of as much as $35 million if its answers are late.
The U.S. House Energy and Commerce Committee has scheduled a Wednesday hearing on Takata airbags. Hiroshi Shimizu, the company’s senior vice president of global quality assurance, is scheduled to testify at a congressional hearing for the second time in less than two weeks. Shimizu and NHTSA Acting Administrator David Friedman were among those questioned by the Senate Committee on Commerce, Science and Transportation on Nov. 20.
Japan’s regulators and NHTSA are conducting daily meetings to share information about Takata recalls, Transport Minister Akihiro Ohta told reporters last week. The crisis poses a threat to the reputation of the nation’s manufacturing sector, he said during a Nov. 28 briefing in Tokyo.
