Hedge funds battered as shares soar
SAINSBUrY’S shares surged yesterday as investors welcomed its massive tie-up with Asda – hammering speculators betting on a bleak future for retailers.
Vulture investors hoping for a high Street meltdown have gambled heavily on a fall in Sainsbury’s share price.
But yesterday the stock jumped 14.5pc, or 39.2p, to 309p thanks to its audacious bid, adding £860m to the value of the company. It will have triggered multi-million-pound losses for the hedge funds expecting disaster.
Laith Khalaf of investment firm hargreaves Lansdown said: ‘Stuff like this can really blow you out of the water if you’re betting on a price fall. A lot of people have been taking bets against the sector, which has led them to Sainsbury’s. An individual bit of good news on a company they’re betting against which surprises the market can really take a heavy toll.’
For months, Sainsbury’s has been heavily targeted by short-sellers.
Short- selling happens when a speculator borrows shares from another investor and sells them on the market, promising to buy them back and return them at a future date.
The short-seller hopes that prices fall in the meantime, allowing it to buy the stock back for less than it was sold for and pocket the difference as profit.
The high Street has attracted speculators in droves because of a year-long squeeze on consumer pay which ended last month, and the rise of internet shopping which is destroying traditional businesses. At least 10.7pc of Sainsbury’s shares were in the hands of shortsellers at the end of last week, making it the seventh most heavily shorted company on the London Stock exchange.
one of those betting on a drop in the share price is Crispin odey, the mayfair hedge-fund boss who has repeatedly predicted another UK recession. The 59-year-old investor, who is married to fund manager and banking dynasty scion Nichola Pease, had a 0.8pc short position in the business.
Sainsbury’s rise in value yesterday will have cost him millions of pounds.
others betting against the business include giant US fund Blackrock, run by Larry Fink, with a 1.7pc short position, and Chelseabased marshall wace with 1.9pc.