Short-sellers target undertaker
SHORT-SELLERS have ramped up their bets against undertaker Dignity after the competition watchdog began an inquiry into the funeral industry, which is in the midst of a price war.
Hedge funds Lombard Odier, Blackrock and Merian have all increased their short positions against the funeral provider in the last three weeks. At least 2.9pc of Dignity’s shares are now on loan, up from zero disclosed shorts in September.
The Competition and Markets Authority launched a full-scale investigation in November after finding that funeral prices had risen at more than three times the rate of inflation over the past 10 years.
Dignity, Britain’s only listed undertaker, has been in turnaround mode since warnings about heightened competition from low-priced rivals wiped two thirds off its stock market value between last November and February this year. It brought in consultants LEK to advise on a cost-cutting overhaul and has been experimenting with lower prices after the Co-operative Group knocked £100 off the cost of its cheapest package.
Dignity welcomed the CMA probe, insisting it wanted “greater transparency on pricing, more consumer choice and high levels of quality”. But the news knocked 17pc off its shares, now trading around a five-year low.
The Government is also looking at tightening regulation of the pre-plan funeral market amid concern that some buyers are being ripped off by rogue sellers.
Dignity declined to comment.
Mike Mccollum, Dignity’s chief executive, brought in consultants LEK earlier in the year to advise on strategy