US hedge fund controlled by billionaire surfer forced to abandon big bet on Sainsbury’s after grocer’s shares surge
- Dan Loeb’s third run was stabbed as Sainsbury’s shares rose 15% to £3.40
- This was the result of rumors of a takeover bid by a US private equity firm
- Third Point Closed Its Entire Grocery ‘Short’ Position
- It was one of many hedge funds that cut their bets
A US hedge fund, controlled by a billionaire surfer, was forced to abandon its huge bet on Sainsbury’s after the grocer’s stock rose last week.
Third Point — controlled by Dan Loeb, a Wall Street hedge fund manager, surfer and philanthropist — was stung when Sainsbury’s shares rose 15 percent to £3.40.
The rise was driven by rumors that US private equity buccaneer Apollo weighed in on a takeover bid of more than £10 billion.
Too hot to handle: Third Point was stabbed as Sainsbury shares rose 15 per cent to £3.40
Data shows that Third Point has closed its entire “short” position in Sainsbury’s, meaning it is no longer betting on a fall in its share price.
It was one of several hedge funds that cut their bets.
Short sellers borrow shares from other investors for a fee and sell them on the open market. They then hope to buy back the stock at a lower price and make the difference when they return the stock to the original owner.
According to Shorttracker’s website, 4.1 percent of Sainsbury’s shares are lent to shortsellers.
Earlier this year, Sainsbury’s was among the top five companies with the most short positions in the London market, with 9.5 percent of the company’s shares lent to short sellers.
There are now only four investment firms that have disclosed short positions in Sainsbury’s. They include BlackRock and Marshall Wace, the hedge fund founded by tycoon Sir Paul Marshall, a Brexit supporter and funder of the right-wing news channel GB News.
According to Short Tracker, Third Point – which manages more than £10 billion – closed its short position in Sainsbury’s on Aug. 23, the same day its shares skyrocketed.
Loeb founded Third Point in 1995 with $3 million after a career on Wall Street. The fund’s main investment strategy is ‘activism’: buying shares in ailing companies, replacing inefficient management teams and trying to make the companies successful again.
Named after a surfing beach in California near where Loeb grew up, the fund has previously taken significant stakes in Yahoo, Sotheby’s and Nestle.
City sources said it’s unclear whether Third Point began to close its short position before rumors circulated last weekend about Apollo’s interest in buying Sainsbury’s. Short sellers are estimated to have lost £62 million due to Monday’s spike in share price.
Brokers said some shortsellers have “covered” their bets by buying back shares in the market, which would have contributed to the rise in Sainsbury’s share price on Monday.
That may have been a premature move, though, as wells near Apollo have been violating cold water over reports it’s interested in buying Sainsbury’s. fight for Morrisons.
Sources close to Apollo say the private equity firm is still focused on talks with the SoftBank-backed Fortress consortium over Morrisons’ £9.5bn takeover battle
But speculation about a possible bid for Sainsbury’s has grown since Daniel Kretinsky, a secretive investor known as the “Czech Sphinx,” began building a large stake in the company. He owns almost 10 percent of it, which amounts to about £100 million.
Sainsbury’s has received several acquisitions in the past, including one from the Qatar Investment Authority. It once had a 30 percent stake, but that is now half.
On Friday, Sainsbury’s had given up some of Monday’s huge profits and closed at £3.10.
GROCER IN RESEARCH TO SELL ITS BANK ARM
Sainsbury’s is in advanced talks to sell its banking arm to private equity firm Centerbridge Partners for £200m.
The US company is in advanced talks with Sainsbury’s over the purchase of the bank and, according to Sky News, a day could be announced in the coming weeks.
Sainsbury’s said last year it was in talks with potential buyers of the bank over reports of takeover interests, but tense talks may not lead to a deal.
Sainsbury’s Bank has approximately two million customers and sells products such as home insurance and credit cards.
It withdrew from the mortgage market in 2019, amid intense price competition in the sector, as a prolonged period of ultra-low interest rates hurts the profitability of smaller lenders.
Tesco Bank has also pulled out of the mortgage market, selling its customer base and recently said it was exiting the current account market.
Sainsbury’s has said it will stop pumping money into its banking department. Centrebridge has experience in the finance industry and has previously invested in medium-sized lender Aldermore. It also tried to buy Williams & Glyn from Royal Bank of Scotland, now called NatWest Group, but that deal failed.
The private equity firm could use the purchase of Sainsbury’s as a springboard to buy up other banking activities in the UK. A Sainsbury’s spokesman declined to comment.