Inside Move: Midway refuses to go short

Vidgame pub expected to crash

As Viacom honcho Sumner Redstone continues to accumulate shares of vidgame publisher Midway Games, a lot of investors have been betting that he won’t keep it up and that Midway’s high-flying price will come crashing down.

The stock has risen from less than $3 a share two years ago to $15 this month, a period of time that corresponds to Redstone amassing about 86% of outstanding shares.

The bearish investors have been selling Midway stock short — an investment strategy that involves borrowing shares from a broker to sell and hoping the price goes down so the borrowed stock can be replaced at a lower price.

Earlier this summer, more than 60% of the float — stock available for trading (not owned by Redstone) — had been shorted.

The short sellers have a certain amount of logic on their side. Midway is losing money, and its shares on a price-to-sales basis are selling for 50% to 10 times as much as other vidgame publishers, some of whom are making plenty of money.

But none of the other publishers has a major stockholder like Redstone, who has steadily bought Midway shares through his National Amusements company all summer. Government filings show Redstone buys Midway stock almost every day on the open market.

And to the dismay of short sellers, the stock price has not come down.

To paraphrase William Randolph Hearst, when it comes to investing, never pick a fight with a guy whose net worth ends in nine zeros.

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