Hedge funds cash­ing in on Metro’s slide

Daily Mail - - City & Finance - by James Bur­ton

METRO Bank shares hit a record low fol­low­ing a dis­mal set of re­sults, hand­ing a mul­ti­mil­lion­pound wind­fall to hedge fund boss Crispin odey.

The stock fell 16pc af­ter it re­vealed cus­tomers had pulled hun­dreds of mil­lions of pounds out of their ac­counts in the first three months of 2019.

Metro shares are down 84pc since a peak in March last year, wip­ing £2.9bn off its value amid mount­ing fears over its fu­ture af­ter an ac­count­ing er­ror.

The slump has led to a huge wind­fall for hedge fund bosses such as odey, who have been bet­ting on a fall in the bank’s value for more than a year.

over­all, hedge funds have short- sold 12.2pc of Metro shares, mean­ing they make money if the price drops.

Metro is the most- shorted firm on the lon­don stock Ex­change, sug­gest­ing in­vestors are more pes­simistic about it than any other listed firm. odey’s May­fair-based fund is now the big­gest gam­bler, with a bet against 3.83pc of Metro’s shares, which yes­ter­day fell 16pc, or 124p, to 650p.

It is not pos­si­ble to cal­cu­late how much has been made by the 60-year- old – who once spent £130,000 on a chicken coop at his home – but it is likely to be tens of mil­lions.

His company, odey As­set Man­age­ment, first dis­closed it was short­ing Metro stock on April 20 last year, and ini­tially short- sold 0.51pc of Metro shares, which were worth £17.2m at the time.

This same-sized stake is now worth just £3.2m, mean­ing the hedge fund boss has on pa­per made around £14m from this ini­tial gam­ble alone.

days af­ter odey’s po­si­tion was made pub­lic, the stock dropped 10pc as in­vestors started fret­ting it would have to raise ex­tra funds from the stock mar­ket. As Metro’s prob­lems wors­ened, odey con­tin­ued building his short stake.

By the end of 2018, Metro’s shares had more than halved af­ter it first bor­rowed £250m by is­su­ing bonds, and tapped up in­vestors for £300m.

Mean­while odey in­creased his short 2.15pc. The share slide gath­ered pace in Jan­uary when the bank said it mis­cal­cu­lated the risk­i­ness of some loans and odey con­tin­ued to ramp up bets against the bank. later the Mail re­vealed this prob­lem had been un­cov­ered by the Bank of Eng­land, not Metro’s own staff as first sug­gested.

The sell-off in­ten­si­fied in Fe­bru­ary when Metro said it would have to raise £350m, and re­vealed reg­u­la­tors were in­ves­ti­gat­ing its er­ror. The lat­est crash came af­ter Metro said de­posits fell £566m in the first quar­ter.

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