One of the market’s most feared bear raiders took aim at a European telecoms company yesterday, in the latest short-selling attack from the United States.
Carson Block, the founder of Muddy Waters, shorted TeliaSonera, the Swedish phone company battling a corruption scandal in Uzbekistan, published a punchy report and went on the offensive on Bloomberg TV.
In the report, he questioned the company’s transparency around its Eurasian business and argued that Uzbekistan appeared to be “only the tip of the iceberg”. TeliaSonera is facing investigations by the US Department of Justice and Swedish prosecutors into how it bought phone licenses in Uzbekistan in 2007 and announced plans last month to withdraw from central Asia.
The company hit back at Muddy Waters yesterday, arguing that it did not accept the conclusions and was “open and transparent as possible with respect to listing requirements and the investigations”.
Muddy Waters’ report follows its shorting of Noble Group, a Singapore-listed commodities trader, in April, and comes after other high-profile attacks from Gotham City on the London-listed Quindell and Kerrisdale Capital on Allied Minds last month.
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While Muddy Waters’ action hit TeliaSonera’s shares by as much as 8 per cent in Stockholm, in the City, the going was smoother. The FTSE 100 halted a three-day losing streak, rallying 69.06 points, or 1.1 per cent, 6,338.67, as global equities rose on signs of low interest rates for longer.
Trading updates kept dealers busy. Unilever added 100p to £28.90, among the biggest risers, on better-than-expected third-quarter sales, but Burberry moved in the opposite direction, slumping 117p to £13.02 after worse-than-expected first-half figures, blaming them on a slowdown in China and Hong Kong.
An upgrade to Hargreaves Lansdown from RBC to “sector outperform”, after the financial adviser’s well-received first-quarter results in the previous session, pushed shares up 70p to £14. Raising net inflow forecasts for this year, and next, RBC said that Hargreaves was leading a growing market, but cautioned that potential future insider selling could weigh on the shares.
Other financial services stocks were in demand. Man Group, the world’s biggest listed hedge fund, jumped 7¾p to 159p on the FTSE 250, after quarterly net inflows of $1.4 billion beat analyst forecasts. Encouraging results from peers and M&A speculation in the semiconductor market among analysts lifted ARM Holdings up 46½p to 979½p. Takeover rumours concerning Shire, up 54p to £43.75, and Radius, the American bone-disease specialist, were reheated.
Weighing on the blue chips was Sports Direct, whose shares have fallen by about 12 per cent since it emerged last Friday that Dave Forsey, its chief executive, had been charged with a criminal offence relating to the administration of its USC fashion chain. They fell 24½p to 650½p.
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Brent crude fell 1.6 per cent to $48.89 a barrel, heading for its worst week in seven months after the US government reported a bigger-than-expected jump in crude stockpiles. Premier Oil fell 1½p to 86½p.
On AIM, Fusionex International, the software company, bounced 32½p to 362½p after Panmure Gordon placed 4.3 million shares at 325p in an oversubscribed transaction.
Watchdog fails to dent CFDs
Investors in spread-betting firms have shrugged off concerns about greater scrutiny of contracts for difference from the City regulator.
The Financial Conduct Authority’s board has asked its regulatory team to gather more information around CFDs — a way to gamble on price movements without owning a particular share — and noted the “ongoing work looking at the promotion and appropriateness tests for purchase of contracts for difference” at a recent meeting. Analysts at Goodbody said that until the regulator issues any directives, the scrutiny was more negative than positive.
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For Playtech, whose business is “heavily reliant” on getting new customers, any change could hit the company’s market growth. However, it added that any tighter regulation introduced could also put pressure on smaller operators, leaving the bigger players to potentially take share.
Shares in Playtech, whose £450 million acquisition of Plus500, the CFD broker, has been delayed, rose 11p to 810p. Plus500 has already come under scrutiny from the FCA, which earlier this year froze UK customer accounts. The bigger rival IG gained 12½p to 734p.
Wall Street report
Stocks rallied sharply from the previous sell-off after strong figures from Citigroup and soft economic data that pushed back the argument for an increase in interest rates. The Dow Jones industrial average jumped 217 points to 17,141.75.