Provident Financial share surge makes it “a proper short again” as hedge funds sense a fresh opportunity
Hedge funds have upped bets against Provident Financial, hoping to capitalise on any negative reaction to the sub-prime lender’s recent share price surge.
Provident’s market value leapt over 70 per cent on Tuesday. While soaring to around 1,000p a share, its stock market value remains less than a third of what it was a year ago.
The number of shares borrowed by short sellers had fallen steadily since mid-January but has spiked during the last five days. Almost a fifth (17.43 per cent) of Provident’s stock is on loan to those betting against the lender, according to IHS Markit.
Over the last week, major short sellers such as Marshall Wace, Pelham Global, WorldQuant and TT International have trimmed their positions, according to regulatory filings. This indicates an increase in bets placed by smaller hedge funds, which need only disclose a short position of greater than 0.5 per cent.
Read more: Woodford throws his weight behind Provident… and he had to
Long investors, led by retail fund giants Woodford and Invesco, were buoyed by Provident finalising fines and redress following an investigation by the Financial Conduct Authority. A probe into the mis-selling of a credit card protection product had been seen by many in the City as a key concern. Fines and redress of less than £200m were significantly lower than some analysts had projected.
However, those betting against the Bradford-based firm continue to query Provident’s decision to stand by an operational overhaul to bring agency staff in-house.
“Provident is back to being a proper short again,” one London-based hedge fund told City A.M..
Read more: “Utterly impossible” for Provident to change its path, says rival Morses