How short sellers won big on IDP Education, a story of housing market pain

Already a subscriber?It’s the bad news that investors in IDP Education have been bracing for – and the growing army of short sellers attacking the $4 billion firm have been betting on.

IDP has managed to trim its costs to match the drop in revenue, which means its adjusted earnings before interest and tax for the 2024 financial year will be flat compared to 2023. But market consensus has been for EBIT growth of about 10 per cent, with Morgan Stanley forecasting growth of 13 per cent just a few weeks ago.says the company is bracing for a drop in both student placement volumes and English language testing markets.

The short trade had already been performing well this year, with IDP shares down 20 per cent from January 1 before yesterday’s fall, with shares closing 7.5 per cent down.O’Shannessy was putting on a brave face on Thursday, arguing that IDP has weathered storms like this before, and seen regulatory changes like this reverse. The difference this time, she says, is that IDP is being hit by synchronised restrictions on student numbers in Australia, the UK and Canada.

And like O’Shannessy, bulls believe that IDP is well-positioned to pick up market share during a period of extreme dislocation like this. O’Shannessy says the group is already seeing evidence that it is performing better than the broader market, and that’s why she will continue to invest in the underlying business.

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