Monday 30 March 2020 2:56 pm

Hedge funds circle Paddy Power owner Flutter Entertainment

Hedge funds and institutions are circling Paddy Power owner Flutter Entertainment, whose market value has fallen by a quarter in the past month due to its sports betting exposure.

The suspension of sports fixtures across the globe has sent shockwaves through the gambling sector in recent weeks, with Flutter Entertainment plummeting as much as 35 per cent.

Flutter is the second most shorted stock according to declarations on the Financial Conduct Authority’s (FCA) shorting register in the past week, with funds and institutions shorting at least 13.5 per cent of shares.

William Hill, whose share price has collapsed 141.7 per cent this month, has a 2.17 per cent net short.

Sign up to City A.M.’s Midday Update newsletter, delivered to your inbox every lunchtime

Easyjet has also been hit by shorters looking to capitalise on its near 50 per cent share price drop this month. The budget airline has been hit hard by travel restrictions imposed as a result of the pandemic, and this morning announced it would ground all of its fleet.

Funds have shorted at least 6.19 per cent of Easyjet’s shares.

Short-selling can be a profitable, if controversial, way to capitalise on the falling share price of companies. It involves paying a small fee to borrow a share before selling it on, with the hope of buying it back at a cheaper price later.

Hedge funds cash in on oil price slump

Funds have also zeroed in on oil companies as oil prices tumble to an 18-year low, with brent crude down to $26.30 a barrel. Containment measures have caused demand to slump and supply chains to be severely disrupted, dramatically lowering demand for oil.

Just over 20 per cent of Premier Oil’s shares have been shorted, making it the most shorted London-listed stock, while around seven per cent of shares in both John Wood Group (6.88 per cent) and Tullow Oil (6.97 per cent) have been shorted.

Other heavily shorted stocks include Hammerson which has suffered a drop in retail payments as the government ordered all non-essential retailers to close. It announced today it had received just 37 per cent of the rent it was owed in the second quarter.

Shorting activity has reportedly surged this month and Andrew Bailey, governor of the Bank of England, has urged hedge funds to “just stop” shorting stocks.

Get the news as it happens by following City A.M. on Twitter

Share