Which hedge fund caused the £500m share price plunge?

SHORT sellers have dodged questions over which hedge fund is behind an anonymous report that caused £506m to be wiped off the value of payments firm Paysafe.

The Mail can reveal that four funds hold short positions in Paysafe – which means they are betting that its shares will fall.

On Tuesday, the firm’s shares dropped as much as 36pc when investors were spooked by an anonymous report from an organisation called Spotlight Research, which accused it of engaging in illegal gambling in China.

In recent years, reports like this have become a common tactic of aggressive hedge funds which don’t believe a company is valued correctly. The most notable was when Quindell was targeted by Gotham Research, wiping £1bn off its market value in 2014. Accord- ing to latest filings with the Financial Conduct Authority, the four firms that hold short positions in Paysafe are AEK (UK) Ltd, Oxford Asset Management, Public Equity Partners Management and Sand Grove Capital Management.

They hold short positions ranging from 0.5pc to 3.13pc of the firm’s stock, and stood to make millions if the share price fell.

The Paysafe allegations focus on its links to online bookmaker Bet365. It is claimed that Paysafe gets more than 50pc of its earnings from illegal gambling conducted through Bet365.

The report said Paysafe was allowing illegal gambling in China and evading rules through its digital wallets, which are used to make payments and money transfers.

It is also claimed Paysafe allows illegal gambling in other countries, including India.

The allegation, which spooked investors, was that Paysafe could be hit by a crackdown on illegal gambling in China and that up to 50pc of its revenues were at risk from new regulation in Europe.

Paysafe claimed the allegations were either false or no longer relevant. Last night blue chip City brokers leapt to the firm’s defence, branding the report ‘inaccurate’ and containing ‘glaring miscalculations’. They claimed many of the assertions had been declared by Paysafe already.

Morgan Stanley said it was a buying opportunity for the shares.

Barclays said the report was ‘inaccurate’, ‘grossly overstated the risks’ and some of the claims appeared to be ‘pure speculation’.

It said: ‘In the past 18 months, we believe Paysafe has done a good job of being more transpar- ent about the risks of its business and thus many items highlighted in the Spotlight Research are not actually new.’

Stockbroker Stifel said the report contained ‘glaring miscalculations’ and ‘misinformation’. Analysts said the proportion of Paysafe’s earnings that came from Bet365 was closer to 20pc, and that the company’s digital wallets do not support gambling merchants in China.

Paysafe did not comment further. Shares rose 8.1pc, or 24.8p to 330.5p.

The Mail was unable to contact AEK or Sand Grove. Oxford Asset Management said it would not comment on matters such as this and Public Equity Partners failed to comment.

The FCA would not comment on the share price fall.

A spokesman for Bet365 said it is a remote gambling operator that takes its legal and regulatory obligations very seriously.

‘There is no legislation which expressly prohibits the supply of remote gambling services into China by operators who are based outside China,’ he said.

‘Bet365 has no people, assets or infrastructure in China and does not engage any agents, aggregators or intermediaries, for any purpose, in China.’