More hedge funds may follow Polygon’s lead with short bets against gold miner Petropavlovsk

Gold nuggets

Hedge fund short sellers could soon be circling the troubled Russian gold miner Petropavlovsk, after Polygon Global Partners built a sizeable short bet in the London-listed company, which is facing major governance issues.

Polygon has built a high conviction short in the FTSE 250 firm equating to more than 8 per cent of its total freefloat, according to new data from Ortex, the London-based equity analytics firm.

London-listed Petropavlovsk, whose operations are focused in Russia, said on Tuesday that its half-year results will delayed after it has struggled to appoint an auditor.

Both PwC and Deloitte reportedly declined to audit the firm amid an ongoing wrangle among rival Petropavlovsk investors, which has has seen both chief executive Pavel Maslovskiy and chairman Sir Roderic Lyne voted off the board earlier this year.

The issue has flagged up corporate governance challenges, which could form the basis for more bearish bets by hedge funds going forward.

“It wouldn’t be at all surprising to see more short-sellers join Polygon on the sidelines in the coming days and weeks,” Peter Hillerberg, co-founder of Ortex Analytics, said on Wednesday.

Hillerberg said “significant corporate governance issues” have been exposed at Petropavlovsk in recent months.

But he added Polygon had been building its bearish bet since last year 2019, “dramatically” increasing its position around the turn of the year.

“This position may well be vindicated as the company prepares for what looks likely to be a very public battle between rival groups of investors ahead of the EGM in August.”