BlackRock and Citadel cut Morrisons bets after share price surge
Hedge funds were caught out by an unsolicited approach for UK supermarket group
Citadel and BlackRock are among the investment firms that have quickly slashed their bets against WM Morrison after being caught out by a surge in the UK supermarket group’s share price.
Morrisons, a popular stock among short sellers, jumped 35 per cent on Monday following news over the weekend that it had rejected an unsolicited £8.7bn takeover bid from US private equity group Clayton, Dubilier & Rice.
That sudden move inflicted losses on a number of funds, including Ken Griffin’s Citadel, which had been increasing its bets against the supermarket in recent days, as well as Daniel Loeb’s Third Point and Man Group’s GLG Partners, according to regulatory filings and analysis by data group Breakout Point.
Hedge fund short seller losses on Monday alone could total around £86m, according to Breakout Point estimates, although it is unclear at what price funds were able to reduce their positions.
Prior to the bid, Morrisons was the second most shorted consumer staples stock in Europe, according to Breakout Point, as measured by disclosed positions.
The losses have come during difficult year for short sellers, who borrow stock and sell it in the market, betting they will be able to buy it back at a lower price as the share price falls.
Retail-driven surges in meme stocks such as GameStop have hit short sellers including US-based Melvin Capital and Light Street Capital, as well as London-based White Square Capital, which is shutting its main fund, the Financial Times reported this week. Losses from betting against such stocks have run into billions of dollars.
Ken Griffin’s Citadel upped its bet to 0.53 per cent of the company’s shares on June 10 and then three more times in recent days, leaving it with a 0.8 per cent short position just before the bid was reported. On Monday it slashed its position to 0.27 per cent.
BlackRock had previously disclosed a 2.29 per cent short position, but on Monday lowered this to 1.13 per cent, and then below 1 per cent on Tuesday. London-based GLG Partners was running a 0.53 per cent bet before the bid, but cut this to 0.38 per cent on Monday.
Third Point, which took a 0.5 per cent position last summer, and Ross Turner’s Pelham Capital, with a 1.65 per cent bet, had also bet against the supermarket.
Equity hedge funds have also complained that stocks they bet on are not responding as they expect, while the rally in beaten-down companies has caught out some managers.
This year’s poor fortunes stand in contrast to 2020, when US and UK hedge funds made more than €1bn in a week from the collapse of German payments company Wirecard.
BlackRock and Man Group declined to comment. Citadel, Third Point and Pelham did not respond to a request for comment.