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A Hong Kong hedge fund secretly built up the biggest ever short position in the UK by taking huge bets against Premier Oil shares.
Asia Research & Capital Management should have revealed its bet to the Financial Conduct Authority in February 2017 when its short position in the North Sea oil firm’s shares went above 0.5 per cent.
But ARCM, which invests in distressed assets, did not disclose the bet to the watchdog until Friday last week – when it belatedly revealed that it had built up an enormous 17 per cent short position worth £132million.
Short-selling involves borrowing shares from another investor for a fee, selling them, buying them back, hopefully at a lower price.
The shares are then returned to the original owner, with the short-seller pocketing the difference.
ARCM’s huge short position – thought to be the largest ever disclosed in the UK – is understood to be a hedge against its $380million holding of Premier Oil’s $2.55billion net debt, which becomes repayable in May 2021.
Premier Oil agreed a crucial debt refinancing package in February 2017 when ARCM bought its debt and began shorting the shares as insurance.
The £132million short position does not mean ARCM has spent £132million betting against Premier Oil, but it does pay a fee for borrowing the shares. It means ARCM has some insurance if the shares fall and it suffers because it holds vast sums of its debt.
This is a rising concern when oil prices are falling, as they have done since April.
A source familiar with ARCM, which has not increased its short since June, said the company always hedges all its investments.
Even so, the short position is huge by typical standards. It is the largest short position in Europe by percentage of a company’s shares, according to analysis by Breakout Point. The second largest is CPMG’s 5.86 per cent short position in German technology company Aixtron.
Premier Oil and ARCM declined to comment. The FCA declined to comment on any potential penalty for ARCM for late disclosure.
The final paragraph above about FCA declining to comment is interesting. I have written to the FCA today seeking clarity on what action us shareholders can expect the FCA to take against ARCM for this late declaration. In the past such emails sent to them will be acknowledged but hear nothing back afterwards so I am not holding my breath, but I feel that if enough shareholders write to FCA and if there is press focus, they might take notice and eventually do something. Here is hoping.
Looks like they are in the doo doo
https://www.handbook.fca.org.uk/handbook/DEPP/6/6.pdf
NSTAbz loving the fact the slimy shorter are in the wrong here, apreciate people writing into the FCA to complain, I plan to phone investor relations next week to discuss this subject. Hopefully they can Be penalised and costs them financially will be interesting to see the outcome here. Good luck everyone
Well done.
Does GS not bear some responsibility for this?
IMO this share should be suspended Monday, The gravity of this need addressing by the FCA urgently, the rules are there for a reason. Don't allow ARMC to close in a orderly fashion. Also an in depth look at some of the FT article's about the time of PMO's drop from circ £1.40.
Many thanks for this. I'll be adding my name to the list of long term private investors complain to fca about this serious non comliance with the regulations. This cannot be ignored or brushed under the carpet. All pmo shareholoders need to act to protect our interests and uphold the rule of law
Where would the share price be without this previously hidden short.
Would there be a ZAMA sale needed if Premier Oil was valued fairly.
They have had a huge impact on company policy in my opinion.
I belive next week will be very very interesting and positive for all legitimate pmo shareholders..
Complain to the FCA
https://www.fca.org.uk/consumers/how-complain
Thanks for this. I'll send off complaint today and urge everyone else to do the same. Adds more weight. They need to know the strength of feeling about this. Rules are there for shareholders protection which must be safeguarded
Agree, this disclosure is clear market manipulation aimed at depressing the SP.
PMO should also be all over this not only with the FCA but with the media (they can do this discreetly) publicising what's been going on here. Best chance for us to gain is of the market smells ARCMs blood in the water.
TD needs to step up here and act to protect PMO and his investors.
Premier Oil becomes the target of record £132m short bet by Hong Kong hedge fund
Asia Research & Capital Management built up an enormous 17% short position
The hedge fund did not disclose the bet to the watchdog until Friday last week
The short position is huge by typical standards
By JAMIE NIMMO FOR THE FINANCIAL MAIL ON SUNDAY
PUBLISHED: 22:03 GMT, 7 December 2019 | UPDATED: 22:03 GMT, 7 December 2019
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A Hong Kong hedge fund secretly built up the biggest ever short position in the UK by taking huge bets against Premier Oil shares.
Asia Research & Capital Management should have revealed its bet to the Financial Conduct Authority in February 2017 when its short position in the North Sea oil firm’s shares went above 0.5 per cent.
But ARCM, which invests in distressed assets, did not disclose the bet to the watchdog until Friday last week – when it belatedly revealed that it had built up an enormous 17 per cent short position worth £132million.
ARCM built up an enormous 17 per cent short position worth £132million in Premier Oil +1
ARCM built up an enormous 17 per cent short position worth £132million in Premier Oil
Short-selling involves borrowing shares from another investor for a fee, selling them, buying them back, hopefully at a lower price.
The shares are then returned to the original owner, with the short-seller pocketing the difference.
ARCM’s huge short position – thought to be the largest ever disclosed in the UK – is understood to be a hedge against its $380million holding of Premier Oil’s $2.55billion net debt, which becomes repayable in May 2021.
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Premier Oil agreed a crucial debt refinancing package in February 2017 when ARCM bought its debt and began shorting the shares as insurance.
The £132million short position does not mean ARCM has spent £132million betting against Premier Oil, but it does pay a fee for borrowing the shares. It means ARCM has some insurance if the shares fall and it suffers because it holds vast sums of its debt.
This is a rising concern when oil prices are falling, as they have done since April.
A source familiar with ARCM, which has not increased its short since June, said the company always hedges all its investments.
Even so, the short position is huge by typical standards. It is the largest short position in Europe by percentage of a company’s shares, according to analysis by Breakout Point. The second largest is CPMG’s 5.86 per cent short position in German technology company Aixtron.
Premier Oil and ARCM declined to comment. The FCA decli
They have been doing this for almost 3 years. Their position dropped to under 4% last year. They reduced as oil climbed and started adding again as they watched oil fall. They have failed to notify but seems to me the main street know all about the hedge. Which is how its been termed by all parties. They had a huge position when debt was 2.8billion, seems to me that with debt dropping that pmo is less at risk. But not without risk all the same.
I thought debt was 2billion. Where is 2.55 coming from.
TD answered already. Sale of Zama and Farm down of SL. Too many on here need soothers.
Lazy reporting oiluser it shows the incompetence of the reporter.
How is it TD’s fault if the slimy lenders are shorting PMO shares he will be as ****ed off as anyone with the amount of shares he owns..... if it wasn’t declared then he’s not a mind reader....
Think the clue is in the fact the other shorts are getting out and the share price has gone up. ANd it stopped suddenly in July, pre all the debt reduction news.
Would still like a decent explanation on how they are fully hedged. If they have some call protection, then whoever has written those calls needs to cover stock as the share price goes up
Forgive me if this is a stupid question but I get why ARCM have hedged but why wouldn’t they adjust the short as the SP moves ? Someone said every 1p increase increase in the SP is USD 1.4m down for ARCM. Their position hasn’t changed since June so surely at some stage if the SP keeps going up (and their position stayed the same) their loss on the short would outweigh their gain on the loans ?
Fully agree with the comments that the non reporting of this short is outrageous and i’ll be using that FCA link to complain.
Great to see holders complaining in numbers to FCA there useless at best but united we can do something. Not sure what the FCA will be able to do but I don’t fully understand the legality of the situation. Just a average PI getting screwed for the last 2 years by these shysters makes you bitter
These guys got out pretty quick last year from 15% to 3 or so. They will do it again this year if oil rises to 70. Were dependent on debt reduction and company mo indicates the same.
WOULD be interesting to know now what the average price they shorted at is??? Can they get out now or not with profit or are they already losing money on there short???
Perhaps asking the financial press to comment on this short rather than FSA PMO etc may be a better way forward.
Great pointb manjukwai who would be the best to make alert of this situation press wise I wonder??
I’ve emailed FCA and copied to editor of FT
letters.editor@ft.com
Well done jw61.