One of Europe’s Most Shorted Oil Stocks Faces a Day of Reckoning

(Bloomberg) -- No other oil stock in Europe’s benchmark equity index has attracted as much attention from short sellers as Neste Oyj. It’s a sign of how high the stakes are when the company faces investors this week.

The Finnish oil refiner and renewable diesel maker was the worst performer in Europe’s Stoxx 600 Index last year, falling by a record 62%, as it struggled with plant outages and a tepid demand outlook. Those declines have extended into 2025, adding to the pressure on Heikki Malinen, who became chief executive officer in October.

When Neste reports results and hosts a capital markets day on Thursday, Malinen is expected to give a vision of how to turn around a business that relies heavily on its big bet on renewables. Analysts are predicting a recovery in Neste shares in the next 12 months, but wagers by short sellers suggest a revival is far from assured.

“There is a fair degree of anticipation around the event, super-charged by the significant de-rating of the shares,” said Adnan Dhanani, an analyst at RBC Capital Markets. “Focus at the event will generally be on renewable products, given it’s the growth engine of the investment case.”

Neste declined to comment ahead of Thursday’s earnings announcement. The shares fell as much as 2.5% on Monday, before paring the drop.

Malinen has turned things around before. At the helm of stainless-steel maker Outokumpu Oyj, he pushed through a significant de-leveraging. Prior to that, he helped rejuvenate Finland’s postal service at a time when digitalization was eating into mail volumes.

Neste, a pioneer in the production of renewable fuels, is among the world’s largest makers of sustainable aviation fuel. But it has suffered from uncertainty around prospects for low-carbon fuel demand alongside operational glitches. The return of Donald Trump to the White House has further clouded the outlook for the energy sector.

The firm has invested heavily in its renewable products business, even as refining peers including Shell Plc and BP Plc have gone the other way in the short term. More recently, earnings have struggled to live up to expectations.

“Investors are putting pressure on the CEO to push for higher profitability and to strengthen Neste’s balance sheet,” said Petri Gostowski, co-head of research at Inderes Oy. “Given that they can’t do much about the market, this means cost cutting, slowing down with capital expenditures and slashing dividends.”