Hedge fund’s £35m win on collapse ‘bet’
EXCLUSIVE BY NICK SOMMERLAD Investigations Editor A HEDGE fund raked in £35million betting on Carillion’s collapse – after also administering its pension scheme for thousands of staff now facing redundancy – it is claimed.
A Mirror investigation has found that BlackRock began “short selling” Carillion shares before they collapsed last year. By then it had stopped administering the pension
scheme. Short-selling amounts to betting that a firm’s share price will fall.
BlackRock Investment Management (UK) Limited was one of a handful of funds betting tens of millions of pounds on Carillion’s share price falling ahead of its first profits warning in July, which wiped 70% of the firm’s value.
Business analysts IHS Markit told the Mirror that 105,139,560 or 24% of Carillion shares are
currently on loan to short sellers. Investigators at CorporateWatch found that BlackRock began shorting Carillion shares in 2012 and could have made £35million in profit since the share price collapsed in July. A BlackRock spokesman said: “Over the past 18 months, we have been one of Carillion’s largest shareholders and on a net basis our clients have experienced losses due to the decline in the
company’s share price. BlackRock sold its UK Defined Contributions platform and administration business in 2016 so it no longer administers any pension schemes in the UK, including Carillion’s schemes.”
Former Chancellor George Osborne earns £650,000 a year for working one day a week as an adviser to BlackRock.
Under his six-year term as Chancellor, Carillion was awarded
£786million work of public sector contracts, including constructions of roads, hospitals and schools. When hedge funds believe a company is over-valued, it can “short-sell” its shares by borrowing them off other shareholders and selling them. If the bet is correct, it can buy back the same number of shares for less than it sold them from – the difference is available as profit.