Market Report: Hedge fund Jericho Capital bets £70m on Ocado slipping further

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A New York hedge fund has placed a £70 million bet that Ocado shares will keep sliding.

Jericho Capital, founded in 2009 by Josh Resnick, has more than doubled its short position in the online supermarket to 4.22% over the past month — during which time the shares have slumped 18%, meaning it is sitting on a tasty profit.

Ocado, 3p better off at 270p, is the third most shorted stock on FTSE 250 behind Carillion and Morrisons, according to Markit, with 16.7% of the shares on loan to investors hoping to buy them back at a lower price for profit.

Borrowing of Ocado’s stock has increased by a third since December with no news yet of its keenly awaited first overseas partnership and as fears rise over Amazon’s entry into the UK’s grocery market.

However, speculation that the US giant might buy Ocado to accelerate its launch has slowed the share price decline somewhat.

Another short-selling fan, Crispin Odey, is rebuilding his hedge fund’s short position in Home Retail Group, having trimmed it when Sainsbury’s revealed it made a bid for the Argos owner.

More than 2.1% of shares in Home Retail, down 4.6p to 137.9p, are back on loan to Odey Asset Management, suggesting Odey thinks a takeover will not happen. The “put up or shut up” bid deadline for Sainsbury’s is Tuesday.

The FTSE 100 was set to end the week on a high, up 58.37 points at 5990.15 and edging closer to 6000, as investors were buoyed by Japan’s move to implement negative interest rates.

Imperial Tobacco puffed 82.5p higher to new all-time highs of 3736.5p. If a bidder emerges for the Gauloises owner as speculation suggests, it would likely have to pay in excess of £40 billion.

Investors were unfazed when Vedanta Resources revealed a 51% dive in third-quarter underlying earnings to $494 million (£344.5 million) as the commodities crunch gripped the Indian miner. The shares were 4.4p richer at 240.2p.

Polypipe, up 41% last year, rose 0.25p to 315.5p as the plastic piping specialist took Bwin.Party’s spot in the FTSE 250.

Meanwhile, builder ISG rose 15% or 20.5p to 166p after hostile bidder Cathexsis raised its offer to 171p a share. 

On AIM, cash-strapped Irish oil firm Petroceltic jumped by a third, up 5.51p at 21.76p, in anticipation of a takeover bid from activist investor Worldview, while hydrogen fuel cell storage group ITM Power suffered an outage, tumbling 4.15p or 21% to 15.35p after a discounted placing and open offer for up to £5.9 million.

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January 30, 2016 |
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