Analysis has revealed that at least four separate hedge funds are shorting on Neopost SA. The French company, which is involved in technological solutions in the postage and logistics sectors, has been shorted by Steve Mandel’s Lone Pine Capital, Cliff Asness’s AQR Capital, Rick Sandler’s Emminence Capital and Alan Fournier’s Pennant Capital at levels above mandatory disclosure. The four have shorted the company at -0.508%, -.0995%, -0.895%, and -.72% of shares respectively. The short has been going on since at least since November when Pennant Capital crossed the disclosure threshhold. The other three have crossed the thresholds in the first quarter of this year.

Neopost’s major business is in the corporate sector where they design manufacture and provide mailing systems to their clients. The trouble with their model, and the probable reson for the short, is the same reason postal services all over the world are in decline. There are new easier and better alternatives to mail that have become ubiquitous in all sectors in the past ten years. The volume of mail has dropped significantly and so too has the demand for the machines and designs necessary to handle large volumes of it. The decline in mail seems to be as unstoppable and natural as the decline of many different forms of old media. The markets are quickly being supplanted and usurped by their new media cousins who offer a cheaper and more reliable service.

Neopost is battling the decline in its entire industry by heating up competition within that industry rather than diversifying. They have decided to introduce a cheaper model of its postage meter to compete with PBI, the company that holds the largest market share in the United States. Although this may work to their advantage in the short term their problem is not competition within their particular market place. As outlined above their problem is their entire industry being supplanted by a competing technology. Other hedge funds have filed in the past disclosing their own shorts against PBI, showing that it isn’t simply the company the market thinks is in trouble but the industry.

On a more temperate note it does seem that there will be a position for postage in the future albeit a smaller one. If Neopost use a strategy that suggests they know their limits or else move into a different industry requiring similar corporate knowledge they may well beat out the hedge funds.