Hedge fund short sellers rocked by Sainsbury’s share price surge amid Apollo takeover talk

Sainsbury's

Hedge funds betting against Sainsbury’s have been left counting the cost of their negative wagers this week after the FTSE 100-listed supermarket giant saw its share price rocket on the back of fresh takeover rumours.

BlackRock Investment Management, Marshall Wace, and the Pelham Long/Short Master Fund are among the high-profile hedge funds positioned short against the UK supermarket giant, according to regulatory disclosures made to the UK Financial Conduct Authority.

The UK’s second-largest grocery chain initially saw its share price rocket by some 15 per cent on Monday following weekend media reports that US private equity firm Apollo Global Management was preparing a potential GBP7 billion (USD9.6 billion) swoop for the retailer.

Though Sainsbury’s value has since pegged back slightly, it remains up more than 10 per cent this week. Wednesday’s 321p is approaching a near-three year high for the retailer, which only last month was found to be the second most-shorted company among London-listed stocks, according to GraniteShares data.

FCA disclosures show BlackRock has a 2.02 per cent net short position, Pelham is sized at 1.28 per cent net short, while Marshall Wace is 0.65 per cent. In the past, well-known brand name hedge funds including Citadel, AHL, and GLG Partners held bearish bets against the company.

Earlier this summer, short sellers took a hit after the company surged on the back of surprisingly strong Q1 sales numbers, which prompted it to revise its profit outlook upwards.

New York-based Apollo – which is also understood to be eyeing a consortium bid for rival retailer Morrison’s alongside Fortress Investment Group – is one of several PE giants said to be weighing up a bid for Sainsbury’s.

Along with Tesco and Asda, Sainsbury’s and Morrisons comprise the UK’s ‘Big Four’ supermarkets that dominate the grocery sector. Sainsbury’s is seen as a particularly attractive target due to its extensive property portfolio in the southeast of England.

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Hugh Leask
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Editor, Hedgeweek