Hedge funds are betting on further falls in the shares of the embattled construction company Carillion after a torrid week in which its stock crashed more than 70%.
Blackrock and Marshall Wace are among the funds keeping sizeable positions against the company to make it the most-shorted stock on the market. The percentage of shares on loan — a proxy for short interest — stood at 28.2% at the end of the week.
Despite speculation that the company could be targeted by overseas bidders, hedge funds are gambling on more pain after Carillion admitted problem projects ranging from a new hospital in Liverpool to a shopping mall in Qatar would cost it £845m in writedowns.
The FTSE 250 outsourcing group has long been a target for short-sellers, amid concern over rising debt and a £587m pension deficit. Its share price crash left it worth just £242m.
Industry sources said the Australian bank and asset manager Macquarie was running the rule over Carillion. Macquarie declined to comment.
Advertisement
Carillion’s chief executive Richard Howson was replaced last week by the former Weir Group boss Keith Cochrane, who stepped up from non-executive director to interim chief executive.
Sources close to the company said it only began to uncover the extent of its problems in May, after new finance director Zafar Khan took over in January from Richard Adam. Adam, finance director since 2007, avoided the full brunt of last week’s share price collapse. His 2016 bonus of £139,932 was paid in cash — unlike Howson’s, whose £245,224 bonus was paid half in shares.
Adam, who is a non-executive director at train operator First Group, housebuilder Countryside, estate agent Countrywide and warship designer BMT, left Carillion with shares and potential awards totalling about 890,000 shares. Their value had crashed to about £500,000 by the end of last week.
Last week’s crash hit private investors hard. Brewin Dolphin, which manages thousands of individuals’ nest eggs, holds a 4.73% stake, which plummeted in value to about £11.4m. Brewin is understood to have recommended its wealth managers buy the shares for private clients up until May, despite mounting concerns about its finances.