Short sellers target JD Wetherspoon and Punch
Over 18% of shares in JD Wetherspoon and 17% of Punch shares are thought to be out on loan to short sellers.
The Observer quotes research from Data Explorers, which shows the full extent of short-selling in the pub sector. Northern Rock had 20% of its shares on loan before its fell into trouble. Mitchells & Butlers also has 9.35% of its shares out on loan.
Short sellers are targeting consumer companies, such as pubcos, after the ban on short selling financial stock. Short sellers borrow shares and sell them before buying back at a lower price.
Well known short seller David Einhorn is believed to be the biggest investor in Punch Taverns with over a 9% stake.
Wetherspoon boss Tim Martin recently said that he doesn't mind short-sellers. Referring to his own move to buy £700,000 of Wetherspoon stock a few weeks ago, he said: "The reason I was able to do that is that people have been shorting the stock. Executives traipsing around the City are not enhancing the company from an operational point of view. If you think the price is too low, go and buy some shares."
Martin also issued short-sellers with the following warning: "Good luck to them — if they hang on long enough they are going to make big losses."
