FT13 Feb 2017 12:41
The top 26 investors in Ocado have claims on more than 100 per cent of the online grocer’s shares, an unusual situation created by its main shareholders buying borrowed stock and effectively acquiring double rights to some holdings. Sample the FT’s top stories for a week You select the topic, we deliver the news. Select topic Enter email addressInvalid email Sign up By signing up you confirm that you have read and agree to the terms and conditions, cookie policy and privacy policy. The high concentration of Ocado share ownership is likely to increase volatility in the company’s share price. This heightens the risks for so-called short sellers in a stock where their combined negative bets represent a large proportion of the shares available to be bought and sold. Hedge funds have borrowed 18.4 per cent of the Ocado shares in issue, making it the third most shorted UK stock on that basis, according to Markit. Ocado has become a battleground stock, with a clash in attitudes among investors towards its business model. The company has for years been trying, without success, to sell its technology to foreign retailers. The large group of hedge funds shorting Ocado stock doubt whether Tim Steiner, the company’s chief executive and one of three former Goldman Sachs bankers who founded it in 2000, can pull off his key growth initiative of signing up grocers outside the UK. Hedge funds commonly borrow shares to sell them “short”, in the expectation that the price will fall and they can be repurchased at a profit. The process creates two investors with rights to the same share: the buyer, and the lender who retains a right to recall borrowed shares. In Ocado’s case, many of the buyers and the lenders are within a particularly small group of shareholders. It is unusual for such a small group to have rights to more shares than exist — and reflects the number of Ocado shares held by the company’s original backers. Most of the top 10 shareholders, who control 75.6 per cent of the shares in issue, have not sold stock. Ocado declined to comment. Lombard Ocado makes investors wait in for an overseas delivery It has been two years since Ocado promised a new retail partner for its technology Investment banks have offered more than 3 per cent in annual interest to those prepared to loan shares in the delivery group, according to investors, one of whom dubbed such payments the “Ocado dividend”. The 26 largest Ocado shareholders have accumulated rights over 100.3 per cent of the shares in issue, according to recent regulatory filings and Bloomberg data. The figure excludes shares held by an employee trust that has waived voting rights. Ocado endured years of losses while investing hundreds of millions of pounds in delivery infrastructure, even as supermarket giants such as Tesco and J Sainsbury opened internet arms that operated more cheaply out of their existing stores. It turned profitable in 2014, aft
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