Hedge Funds Gamble on Fall of Bookmaker Shares

It has been reported that hedge funds are increasingly gambling on profiting from falls in the share prices of British bookmakers. The news comes as bookmakers are facing an increase in taxes and restrictions on the running of high street betting shops.

Markit data shows that interest in short sellers in a number of British betting firms has risen over the last two months.

Ladbrokes shares on loan have climbed to more than 6% of the total available, from 4.7%, and William Hill’s shares on loan have risen to 2.6% from 0.3%.

A short seller in a hedge funds borrow a share they expect to fall, sells it immediately then buys it back later at a lower price. This means that they can pocket the difference after returning the shares to the lender.

This comes as local councils in the UK gained the right to refuse applications for new betting shops on the high street. Furthermore higher taxes have been placed on gambling machines which account for roughly £1.5 billion of annual revenues for British bookmakers.

According to Markit the demand to borrow William Hill’s shares made it the 17th most shorted company on the FTSE 100 while Paddy Power has the highest proportion of its shares out on loan in more than three years.