Hedge funds cashing in on Metro’s slide
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.