Yahoo Finance Bets against Hargreaves Lansdown reach record high
Stock market investors have become increasingly anxious about the future of Hargreaves Lansdown ramping up bets against Britain’s biggest broker.
A record one in 20 Hargreaves shares are now being used for “shorts” – a bet that the company’s value will fall. It is the seventh most shorted stock listed in London, according to analysis of regulatory filings by Castellain Capital, an investment manager.
Six firms including the world’s largest asset manager, BlackRock, and hedge fund Marshall Wace have declared new shorts in the broker. This comes on the back of a 38pc fall in Hargreaves’ share price this year.
A “short” is when an investor borrows shares of a company and sells them on the open market – promising to buy them back at a lower price. Any profit from this represents a successful bet that the company’s share price would fall.
At the start of the year, less than 1pc of Hargreaves shares were being used for shorting but this has spiked to 5.8pc – the highest level since the City watchdog, the Financial Conduct Authority, started tracking data in 2012.
Julian Roberts, of the broker Jefferies, called a short against Hargreaves Lansdown an “easy bet” given broader stock market volatility. Falling share prices across the globe impact the amount of assets the company managess and therefore fees it can charge its customers. Hargreaves operates a “percentage fee” model meaning it takes a fixed proportion of its customers’ savings each year.
Mr Roberts also said investors had become increasingly concerned with the age profile of Hargreaves customers. He said: “The most profitable customers are approaching retirement and handing over their massive portfolios to other financial advisers.”
He added that the broker was facing increasing pressure to cut charges because competition in the DIY investment industry had ramped up. Rival brokers such as Interactive Investor have successfully scaled up their customer offering while charging “fixed fees” – meaning customers with larger savings pots can trade for less.
Mr Roberts added: “There have been reports of customers being offered cheaper deals in order to prevent them from going to a competitor.”
Last month, a Hargreaves Lansdown offered a customer a secret “special arrangement” after he threatened to switch to Interactive, according to investment publication Investors’ Chronicle.
Online retailer Boohoo remained the most shorted stock in London, with more than 8pc of its shares used to bet against its rise. The share price has fallen 63pc this year.
Hargreaves Lansdown is now more shorted than beleaguered car maker Aston Martin Lagonda – whose share price tanked after it issued new shares 78pc cheaper than the market price.
Hargreaves Lansdown declined to comment. A spokesman highlighted comments from its chief executive, Chris Hill, in the last annual report in August.
Mr Hill told investors at the time: “Against a macroeconomic and geopolitical climate not seen in a generation with subdued flows and lower activity across wealth management, we have delivered £5.5bn of net new business through the year and the quality of our service attracted a further 92,000 net new clients.
