Hedge fund vultures bet £336m that Ocado shares will plummet

VULTURE investors are betting £336m that Ocado will crash and burn with its bid to go global.

Hedge funds are short selling 18.4pc of the online grocery company’s shares – the second-highest percentage of any firm on the London Stock Exchange behind construction firm Carillion.

This means traders will make money if Ocado’s share price falls, effectively allowing them to bet against the business’s success.

The short selling suggests that a rumoured takeover of Ocado by Amazon has been dismissed by many major financiers – and that serious doubts remain over the firm’s entire business model.

Shares peaked in 2014 when the food delivery firm proved a hit with customers, but since then have dropped by 50pc.

While it boasts some of the most cutting edge warehouse technology in Britain, Ocado has been battling to convince investors it has an achievable plan for the future at a time of unprecedented pressure on retailers.

The company has a solid food delivery business with 580,000 customers. But bosses have pinned their future hopes on big chains buying its robotic warehouse technology – a move which could trigger massive pay-outs for investors.

They have talked up the prospect of a major international deal for years but have repeatedly disappointed shareholders, missing a self-imposed deadline as far back as 2015.

In June, however, shares leapt to a 13-month high when Ocado finally unveiled a deal to supply software to an unnamed company overseas. Despite hopes this would be a breakthrough moment, the partnership was with a regional rather than a national player and not on the scale some had hoped.

Shares were boosted again days later by gossip suggesting Amazon could mount a bid. The news sent a shockwave through the industry and crashed supermarket stocks on both sides of the Atlantic, as traders panicked over the enormous financial firepower Amazon could bring to bear on competitors.

Ocado rocketed 11.1pc in a day on hopes it would be next to be snapped up.

A host of hedge funds have built up large bets against the stock, with the biggest, a 3.46pc stake, held by US firm Discovery Capital Management which is run by billionaire Robert Citrone. US giant GMT Capital is next with a 2.98pc short position, followed by London-based Marshall Wace with 2.62pc. In fourth is New York giant BlackRock with 1.5pc, and Swiss bank UBS’s asset management arm is shorting 1.35pc of the shares in fifth.

Ocado made profits of £14.5m off sales of £1.3bn in 2016.