The investors betting on stock market pain for Halifax Bank of Scotland came out of the shadows on as the lender’s £4 billion cash-call came under more pressure.
Under new rules from the Financial Services Authority (FSA) watchdog to tackle market abuse, hedge funds and other investors must from Tuesday tell markets when “shorting” firms raising funds through rights issues.
Short-selling, or “shorting”, is when someone borrows stock in a company and sells it in the hope of buying it back at a lower price to return to the original owner – pocketing the difference. Under the disclosure rules, US-based investment firm Harbert Management Corporation revealed it shorted 3.3 per cent of HBOS shares – £340 million – through its Harbinger hedge fund.
Meditor Capital Management, which acts on behalf of institutional investors such as pension funds, has also shorted a 0.3 per cent stake.
The FSA has acted to prevent bigger investors exploiting volatility in share prices around firms carrying out rights issues at the expense of smaller shareholders. Any short positions of 0.25 per cent or more must be revealed. But yesterday HBOS shares were more than two per cent lower, trading around the 275p “discount” price of the new stock.