There was good news early last month for Greencore, the Irish sandwich-maker, when its shares soared on foot of an announcement that its estimated earnings would beat analysts’ expectations for a third time in a row.
The company at the time boasted that its profit for the year to the end of September would come in between £95 million and £97 million (€114 million and €117 million), up from its previous forecast, and with chief executive Dalton Philips suggesting it would soon return to its pre-pandemic peak of £105 million in its current financial year. In response, its share price soared from about £1.80 to a high of nearly £2.15 – the highest they’d reached since before the first lockdown.
A corner turned? Not according to the bearish hedge fund traders of London, who have either held on to their short bets against Greencore, or raised them, stock market data shows.
A short bet is a risky trade in which the investment fund borrows shares in a company from a broker, sells them on the open market, and then waits for the shares to drop in value so that they can buy the now much cheaper shares, return them to the broker, and pocket the difference as a profit.
The trade only works if the share price drops, so even the macho traders of the hedge fund world will only take on such a bet if they’re convinced the shares will fall in value.
Marshall Wace, the London hedge fund founded by Paul Marshall and Ian Wace in 1997, was clearly unmoved by the good news in October, since it spent that month taking out ever-larger short trades against Greencore.
[ Greencore shares soar to highest level since Covid on earnings upgradeOpens in new window ]
It currently holds a short against 0.60 per cent of the company’s shares, roughly equivalent to £5.3 million worth of shares at Greencore’s current share price.
Alongside it, GLG Partners, the London hedge fund controlled by the giant Man Group, also nudged its short bet higher in that period too. The bet currently stands at 0.54 per cent of Greencore’s shares, or roughly 4.7 million worth.
And Premier Miton, the £11 billion London hedge fund run by Mike O’Shea, has maintained its short on 0.50 per cent of Greencore’s shares, worth about £4.4 million.
[ European real estate stocks surge, as global trading eyes strong finishOpens in new window ]
All told, therefore, the full amount of shares currently out in short bets is close to £15 million. It’s a lot less than it was in mid-2018, for example, when nearly 15 per cent of the company’s shares were being shorted, but it nonetheless indicates that some corners of the market aren’t convinced by the good news of early October.
The share price, incidentally, has fallen since that high of £2.15 in October to a low earlier this week of £1.93.
- Sign up for Business push alerts and have the best news, analysis and comment delivered directly to your phone
- Find The Irish Times on WhatsApp and stay up to date
- Our Inside Business podcast is published weekly – Find the latest episode here
