Dark horse: US activist fund bets against Paddy Power share price
A US activist hedge fund that's been pushing for a potential sale of the firm behind Caesar's Palace has taken a short position in Paddy Power, hoping that the bookie's share price will fall.
HG Vora Capital Management is 'short' almost 1pc of the Irish bookie, according to Central Bank filings. Shorting allows an investor to make money when a share price falls.
It involves borrowing shares in a company, and then selling them and pocketing the proceeds in the hope that the shares can be bought back later at a lower price. It is a risky investment strategy as the potential losses are theoretically unlimited. Paddy Power Betfair declined to comment, while HG Vora did not respond to a request for comment.
Equity analyst Greg Johnson of Shore Capital said HG Vora may perceive the company to be overvalued versus peers, as its share price is higher relative to earnings. He also said regulatory pressure may be a reason why investors think the shares could fall.