Fund managers bet on falls in leading companies’ market value
Short-sellers have increased their bets on a collapse in the value of several household-name companies despite a post-Brexit rally in stock markets as moneymen continue to bet on big falls in everything from supermarkets to property.
Fund managers have upped by 5 per cent their short positions in Ocado since the referendum in June, meaning that more than a fifth of the online grocer’s stock has been loaned out to firms betting on a drop in its share price, making the company the most heavily shorted on the London market.
The increase in shorting on Ocado is relatively small compared with the 144 per cent increase in shorts on Intu Properties since June 23, with more than a tenth of the shopping centre developer’s stock in the hands of hedge funds and others predicting a crash in its market value.
Simon Colvin, of Markit, which compiled the figures, said the data showed that instead of Brexit acting as a break on shorters, with the market rally forcing them to close out their positions, many appeared to have doubled down.
“What you can see very clearly is that businesses that have a domestic focus are being targeted for shorts. Some of the increases in short activity in property companies have been massive since the referendum,” Mr Colvin said.
One of the biggest victims has been Capital & Counties Properties, with the proportion of its shares out on loan rising by nearly 70 per cent since the vote to 10.7 per cent of its outstanding shares, with big hedge funds, including Marshall Wace, reporting short positions, according to Financial Conduct Authority records.
In many cases, short-sellers have ignored share price rises. The rise in disclosed shorts in Ocado has happened despite a 21 per cent rise in its share price since the Brexit vote, while a 15 per cent uptick in the value of JD Wetherspoon did not stop shorters increasing their bets by 29 per cent to 7 per cent of the pub chain’s outstanding shares.
Crispin Odey, the founder of Odey Asset Management, which manages more than £10 billion on behalf of clients, said in June that his bet on Brexit had “made back what I’ve lost”. FCA data show that Odey has continued to short several big companies, including Auto Trader Group, ITV and Trinity Mirror.
AQR Capital Management, a US hedge fund, is betting against the shares of 28 UK companies, while BlackRock Investment Management, the world’s largest fund manager, has short positions in 42 businesses.
One sector that has avoided the fray is banking. No fund manager has a disclosed short position in even one of the country’s big four lenders, although bank stocks were hard hit by Brexit. According to Markit, CYBG, the owner of the Clydesdale and Yorkshire banks, is the only bank with any short interest, at 7.1 per cent of its share capital.