Baked goods group Aryzta shares have collapsed in the past month like a bad soufflé – but they are flavour of the month in some parts.
Some 9 per cent of the stock is out on loan to hedge funds who have been betting the stock would fall, according to data from Market Securities. These guys, known as short sellers, sell borrowed shares in the expectation that they will fall in value by the time they have to repurchase them and return the stock to the original lender. The difference is pocketed as pure profit.
Aryzta shares fell by 32 per cent, knocking €1.3 billion off the Swiss-Irish company’s value, on January 24th, after it issued the latest in a series of profit warnings over the past two years.
One hedge fund, Naya Capital Management in London, told Bloomberg on Wednesday that it expects Aryzta will need to raise additional funding, even if it manages to sell its 49 per cent stake in French frozen foods company Picard, which was bought two years ago for about €450 million. (The Picard stake was as good as put on the market this week.)
Earnings alert
Aryzta's chief executive Owen Killian, who this week succumbed to the inevitable and announced he is quitting, told analysts on a conference call last month – after the latest earnings alert – that it will not need to go cap in hand to investors for money.
Sources tell Cantillon the view of the board, under chairman of two months, Gary McGann, has not moved from this position, even as it faces having to refinance €600 million of debt next year.
A company spokesman said a hedge fund “with a short interest in a company does not have the same interests as a holder with a genuine equity interest”.
But it is the fact that investor confidence in the company has taken such a battering over the past two years that it is now a plaything for such hedge funds.
