Hedge funds in shorting attack on Balfour Beatty

HEDGE funds and other City investors have placed a £90 million ‘short-selling’ bet that shares in Balfour Beatty will fall amid mounting fears over the construction sector.

The move on the firm follows a string of profit warnings from beleaguered rivals Carillion and Interserve.

The proportion of Balfour shares out on loan – a measure of the scale of a shorting attack – is almost 5 per cent, according to Financial Conduct Authority disclosures. It is the highest level of shorting activity in Balfour since the FCA started monitoring the controversial trading tactic five years ago.

The activity also indicates that larger firms are betting against the stock. JP Morgan has the largest short position. Others include Black Rock and US hedge fund AQR Capital.

When shorting, investors profit from price falls by borrowing shares, selling them and then buying them back once they have fallen, pocketing the difference.

The construction sector suffered a shock contraction in September, and last week building services group Interserve issued a profits warning, saying it could breach its banking covenants.

Carillion, which has also been stalked by short-sellers, is in recovery mode after a disastrous summer when it lost three-quarters of its value.

Simon Colvin, an analyst at short-selling data firm Markit, said some investors predict Balfour may follow suit.