Bearish bets on offshore marine services provider Ezra Holdings jumped close to the highest in a year as the failure of smaller rival Swiber Holdings heightened concerns for the financial health of companies in the oil industry.
Shares of Singapore-listed Ezra plunged to the lowest level on record yesterday after Swiber said last week it had filed a winding-up petition as the collapse in crude prices led to a slump in its offshore oil and gas businesses. Swiber later dropped the liquidation plan and said it plans to restructure and operate under judicial management.
"Swiber's knock-on effect is increasing the probability of others like Ezra facing similar issues," Mr Bernard Aw, market strategist at IG Asia, said by phone. "We might see more companies coming forward saying financials have not recovered. I would now prefer to sit on the sidelines and see how it plays out."
Ezra is trying to strengthen its capital structure to weather the slump, working with an adviser to find investors for about US$100 million (S$134 million) of new stock while seeking to extend terms on more than US$100 million of loans and bonds, people with knowledge of the matter said last Friday.
Short interest as a percentage of Ezra's outstanding shares climbed to 8.3 per cent last Thursday from 5.8 per cent at the end of June and near the highest in a year, according to data from research firm IHS Markit.
It is now the most-shorted stock in Singapore behind embattled commodities trader Noble Group, and is followed by oil services company Ezion Holdings.
Ezra extended declines for a sixth trading session yesterday, falling 6 per cent to close at 4.7 cents, the lowest price since its listing in August 2003, while Ezion dropped 1.7 per cent to 29.5 cents.
"Ezra is the most similar to Swiber," said KGI Fraser Securities analyst Joel Ng. "Pressure on the stocks may lead to less support from banks and shareholders for any fund raising. It can become a vicious circle."