Hedge funds bet big on Ladbrokes

Hedge funds have ramped up their bets against beleaguered bookmaker Ladbrokes ahead of this week’s general election, which could deal a blow to the company.

The proportion of Ladbrokes shares out on loan – a proxy for short-selling – has risen to 8.9pc, hitting its highest level since October 2013, according to financial data firm Markit.

The level of share borrowing suggests the FTSE 250 company is the seventh most-shorted stock in the mid-cap index. Short-sellers try to profit from stocks they reckon will fall by borrowing shares from other investors and selling them. They aim to buy them back at a lower price and take the difference before returning the shares to the original owner.

Jefferies analyst James Letten said hedge funds were probably raising their short positions as a bet that the Labour Party will gain power at this week’s general election. Labour have pledged to crack-down on fixed-odds betting terminals (FOBTs), which critics call the “crack cocaine” of gambling, to which Ladbrokes has “massive exposure”, Mr Letten said.

Rival William Hill is less exposed to FOBTs, and the proportion of its shares on loan is smaller, at 1.3pc, although that is up from 0.6pc at the start of April.

A Labour attack on FOBTs would add to the task facing Ladbrokes boss Jim Mullen, who was formerly its head of digital operations and took the helm last month. First-quarter results less than a fortnight ago showed pre-tax profits excluding one-offs fell to £14.3m from £35.6m in the last three months of 2014.

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