Hedge funds lose millions as Ocado soars

OCADO shares surged more than 27pc after it struck a deal to supply its technology to a Canadian supermarket.

In a huge blow to hedge funds who are shorting the online supermarket’s stock, its shares rose to four-year highs – adding nearly £720m to its value.

The FTSE 250 firm made its first foray into North America by striking a deal with Sobeys, Canada’s second-largest supermarket.

Two months ago bosses revealed a long-awaited tie-up with French supermarket Groupe Casino.

Ocado has been boosted by fears of competition from internet giant Amazon, which rattled the grocery market last year with its shock acquisition of Whole Foods. It has prompted North American chains to overhaul their online offerings, with Ocado promising pioneering warehouse and robot technology.

David Shriver, communications director at Ocado, said: ‘Consumers want the ability to buy their groceries while sitting in the warmth of their kitchen and have them delivered to their home in an hour’s time slot.

‘We see lots of factors driving that and without a doubt Amazon buying Whole Foods was part of that.’

Sobeys has more than 1,500 stores across Canada and racked up sales of £13.7bn last year. The deal sent Ocado’s shares 27.5pc, or 113.6p higher, to 526.6p, putting a painful dent in the hopes of hedge funds who are betting its stock will fall.

More than 13pc of the company’s stock is currently shorted. They had piled in as doubts about Ocado’s ability to strike a major deal grew.

Discovery Capital Management has the biggest position at 3pc, with GMT Capital Corp holding 2.3pc and Marshall Wace – one of the firms that shorted doomed construction giant Carillion – holding 1.7pc. They are likely to have lost tens of millions of pounds as a result of yesterday’s movement.

Ocado will create an online ordering system for Sobeys and develop an automated warehouse in Toronto, which will use Ocado’s grid-like system for storing food and its robots for picking and packing goods.

When asked whether Ocado would secure more deals this year, Shriver said: ‘We remain pretty optimistic about the future.’