Hedge fund short sellers seize on Capita’s woes as UK outsourcer’s stock falls further

Financial data

Hedge fund short sellers look set to gain from bets against London-headquartered Capita after the embattled global outsourcing and professional services provider’s stock price slipped again following recent poor first half results.

Capita suffered a GBP28.5 million (USD38 million) loss during the first six months of 2020, and warned of a two-year cash flow squeeze as a result of the coronavirus crisis in its H1 statement last month. The outsourcer’s shares fell some 8 per cent to 28.7p following the announcement before recovering slightly.

Hedge funds have been ramping up bets against the company lately, whose shares again fell under 30p on Wednesday morning.

Systematica Investments, BlackRock, AQR Capital Management, and Ardevora each hold short positions of just under 1 per cent, while Sandbar Asset Management has a 1.25 per cent bet against the firm, regulatory disclosures show.

Capita - whose outsourced services span the public and private sectors, with the BBC and Transport for London among those contracting work to the firm – has seen its stock market value crash this year.

At the start of March, it was trading around 130p a share before plummeting to around 40p, after CEO Jonathan Lewis warned that its turnaround strategy would be more costly and complex than initially expected. The Covid-19 crisis has since piled on further agony for the firm.

The FTSE 250-listed company has long been a target for hedge funds’ shorting strategies, with Marshall Wace, Man GLG and Citadel among the high-profile names making bets against the company in recent years.