The short investment thesis for Reed Elsevier is based on: 1) the low-probability but high-impact scenario of a revolt on the part of academics, libraries, governments, or any combination of the three that decides it no longer wants to subsidize this particular corporation; and 2) the new threat from disruptive green and gold open access competitors. As long as Elsevier takes a defensive, oppositional posture, competitors like Springer and others have the experimental open access field to themselves, with all of the brand-building and academic goodwill that comes with it. Neither scenario is likely to have an impact on share prices in the very short term. Even if the White House were to endorse immediately an open access policy on all federally-funded research, it would take some time before the effects would be felt in corporate profit margins. However, lackluster performance in the other business divisions and the short put option payoff structure of the Elsevier division make the company look like a safe short candidate than most. One short term risk to watch for is of an unexpected sale of the exhibitions or RBI divisions at a significant premium.
U.S. investors considering short positions in the stock should note that Reed Elsevier is dual-listed in London (REL) and Amsterdam (REN), with ADR shares of each company trading in New York under the symbols RUK and ENL, respectively. There are listed options on the plc in London, although they are not actively traded.
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