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Friday 23 August 2019

Citadel doubles down with €110m short bet against Ryanair stock

Citadel's increased short position in Ryanair, at 0.95pc of the airline's shares, is confirmed by the Central Bank of Ireland. Photo: PA
Citadel's increased short position in Ryanair, at 0.95pc of the airline's shares, is confirmed by the Central Bank of Ireland. Photo: PA
John Mulligan

John Mulligan

US hedge fund giant Citadel Capital has doubled down in its bet against Ryanair's shares, boosting its short position in the carrier to almost 1pc, or €110m, of the airline's stock.

The position is almost twice the size of the short Citadel had on Ryanair at the beginning of April. It has steadily increased it in the past number of weeks.

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Citadel was founded by its chief executive, billionaire Ken Griffin. The company has about $30bn (€26.8bn) of assets under management.

When investors short a share, they are betting the share price will drop.

They borrow the company's shares from other shareholders and can profit if the price falls by buying back shares at a lower price to return them to their original owner.

But short positions can turn sour if the share price in the target company rises.

Citadel's increased short position in Ryanair, at 0.95pc of the airline's shares, is confirmed by the Central Bank of Ireland.

Short positions exceeding 0.5pc of a company's stock must be publicly disclosed under EU rules.

Citadel first revealed on April 2 that it had taken a 0.56pc short position on Ryanair. It was the first time since the EU rules were introduced in 2012 that a short position in the airline had been disclosed.

At that stage, Ryanair's shares were trading at €11.16.

By the following, day Citadel had disclosed a 0.73pc short position in the airline's stock, a figure that hit 0.81pc on May 13 and 0.86pc on May 17, when the shares were at €10.80.

Citadel increased its short position following the release of Ryanair's results last week.

Ryanair, headed by CEO Michael O'Leary, said its profit tumbled 29pc to €1.02bn in the 12 months to the end of March, largely due to lower fares.

Revenue for the period was 6pc higher at €7.6bn as Ryanair's passenger numbers rose 7pc to 139.1 million.

Airlines in Europe are grappling with significant capacity in the market, coupled with high fuel prices. Mr O'Leary predicted again that those factors would result in more airline collapses in Europe, and ultimately, reduced supply.

Other global investment giants, including BlackRock and Marshall Wace, have also taken short positions against European travel firms such as Easyjet, Thomas Cook an TUI.

When it released its results, Ryanair's shares fell more than 5pc initially, despite the company announcing a €700m share buyback. The Irish Independent revealed during the week that the airline has also agreed a deal worth hundreds of millions of euro to the carrier with US planemaker Boeing over delivery delays for its 737 Max aircraft after the jets were grounded in March around the world following two deadly crashes.

But Ryanair's shares have continued to trend lower. By mid-afternoon yesterday, they were down 1.2pc at €10.26, valuing the company at €11.6bn.

Irish Independent

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