Stefan Bernstein explains how the EU/Greenland critical raw materials partnership benefits GreenRoc. Watch the full video here.
They even made the Times
Two of the world’s biggest hedge funds are expected to have reaped windfalls by betting against shares of Close Brothers ahead of their sharp fall this week and the scrapping of the merchant bank’s dividend.
Marshall Wace and Millennium both have significant short positions in Close Brothers’ stock, filings with the Financial Conduct Authority show.
“Shorting” is a technique enabling funds to profit from falling stock prices. Shares in the FTSE 250 merchant bank have slumped by about 60 per cent since January 11, when the FCA revealed an inquiry into the car loans market. A fifth of Close Brothers’ loan book, about £1.95 billion, is in motor finance and investors fear that the regulator’s intervention could result in the bank being forced to pay a fine or compensation.
• Close Brothers scraps dividend amid motor finance investigation
On Thursday Close Brothers revealed that it was cancelling dividend payments this year to bolster its capital position ahead of the outcome of the FCA’s review. This prompted a 22.5 per cent drop in its share price on that day alone and the stock slid by a further 9¼p, or 3 per cent, to close on 299¼p on Friday. Close Brothers was valued at almost £1.2 billion by the stock market before the FCA announced its review, but it now has market capitalisation of £450 million.
The FCA requires funds to publicly disclose shorts once a position reaches 0.5 per cent of a company’s issued share capital. Marshall Wace had amassed a 0.62 per cent short in Close Brothers by Monday, while Millennium’s short reached 0.56 per cent a day later, filings made with the regulator show. Both hedge funds declined to comment.
Bosses at Lloyds Banking Group, who are due to present the lender’s annual results next Thursday, are likely to face questions about the group’s exposure to the FCA’s inquiry. Lloyds is a big player in car loans, with a motor finance loan book of more than £15 billion.
The London-based Marshall Wace, which was co-founded by Sir Paul Marshall, the GB News backer, is an influential hedge fund that manages about $62 billion in assets. Millennium, which is based in New York but has a big presence in London, also oversees more than $62 billion.
What I can’t understand is why they have reduced. The risk of a penalty has been there for some time and that is when they should have adjusted (and they did). It doesn’t make sense that they adjust again on the suspension of the dividend. The penalty (if it comes) will have to be paid from somewhere and that hasn’t changed since yesterday’s update.
As you have suggested, it just feels like they’ve gone “whoops the price has moved a lot”, best adjust my target so it looks a little more realistic. The core business and the risk of a penalty is exactly the same as it was when they set their last target, all the business has done is be prudent and prepared in case that penalty comes to protect its share holders. I have bought in here based on that common sense approach.
I agree this seems a ridiculous price. Cutting the dividend was an ingenious move and a sensible business decision. The business hasn’t operated in this way for a number of years and has been operating very successfully so there won’t be any impact on operations and it’s ongoing success even if the FCA uphold the cases (which is a big if). If anything, removing the dividend reduces the risk to holders here because the capital is now there in reserve should the possible penalty become reality.