easyJet short sellers boosted as airline’s share price plummets

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Hedge funds betting against easyJet saw their short positions boosted on Thursday as the low-cost airline’s share price took a sharp nosedive after it rejected a takeover bid.

AHL Partners, AQR Capital Management, Kintbury Capital, Sandbar Asset Management and Systematica Investments are among the hedge funds currently positioned short the FTSE 250-listed airline, regulatory disclosures made to the UK Financial Conduct Authority show. Position sizes range from 0.50 per cent to 0.82 per cent.

Shares in easyJet were down almost 11 per cent at 702pp at one point on Thursday morning after the firm revealed it had rejected an unsolicited bid from a competitor, identified in some media reports as Wizz Air.

In an announcement on Thursday, easyJet said the bid “fundamentally undervalued” its business, adding that the bidder has since abandoned its offer.

Instead, the airline unveiled plans to raise capital through a GBP1.2 billion (USD1.66 billion) shareholder rights issue and a new USD400 million revolving credit facility.

The low-cost carrier – which was frequently among the most heavily-shorted European airline stocks even before the Covid-19 outbreak – has seen its business hit hard during the pandemic, losing some GBP2 billion (USD2.76 billion) as flights were grounded due to travel restrictions and lockdowns.

easyJet hopes the fundraising proceeds will “facilitate and accelerate” its recovery from the impact of Covid-19 by providing resilience from downside risks, as well as “materially improve” its ability to deliver long‐term value to shareholders as the European aviation market looks to rebound from the pandemic.

In the past, easyJet has been shorted by a number of high-profile hedge funds – including Marshall Wace and Citadel – though more recently managers have moved to cut their bearish bets in the company.

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Hugh Leask
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Editor, Hedgeweek