By Chris Dorrell
Short sellers are targeting Metro Bank ahead of a decisive shareholder vote tomorrow on a major refinancing plan agreed just over a month ago.
The bank is the second most shorted stock on the London market, according to filings from the Financial Conduct Authority.
Around 6.4 per cent of Metro’s shares are owned by hedge funds, including Caius Capital and Kite Lake Capital, who are betting on the price to fall. Only Asos, the struggling retailer, has a greater proportion of its shares owned by short sellers.
Short sellers borrow a stock, sell it and then buy it back at a later date hoping that its price will fall, allowing them to return it and pocket the difference as a profit.
Metro Bank’s shares currently trade at 38p, down over 69 per cent this year and more than 98 per cent in the last five years.
Its poor performance this year came after reports emerged that the bank was seeking a capital injection to shore up its balance sheet.
After a dramatic week in early October, Metro announced a major refinancing package, including a £325m capital raise led by existing shareholder Spaldy Investments, alongside £600m of debt refinancing.
Spaldy Investments — led by Colombian billionaire Jaime Gilinski Bacal — became the controlling shareholder with a stake of around 53 per cent.
The equity raise will materially dilute the shareholding of existing shareholders while holders of the bank’s tier 2 bonds will see a 40 to 45 per cent haircut.
Bondholders have already given their backing to the plan, but it still needs to secure majority support from equity investors.
A Metro Bank spokesperson did not directly comment on the short positions, but said: “We are confident that the proposed transaction represents the best outcome for shareholders and therefore it is likely that shareholders will vote in favour”.
“Investors representing around 36 per cent of [issued share capital] have committed to vote in favour of all resolutions as of 9 November 2023,” they added.
