Billionaire hedge-fund trader Crispin Odey is shorting Bank of Ireland in the largest bet against the Irish banking system since the financial crisis in 2008.
Odey's gamble that Bank of Ireland's share price will fall is part of a wider bet against the euro, which is under pressure because of the ongoing crisis in Greece and the increasing possibility of a Greek default and exit from the common currency.
Markets have been volatile over the last month as traders digest the potential impact of a 'Grexit', with the FTSE falling 5pc but both the Dow and ISEQ largely unchanged. A Grexit could lead to falls in the euro/dollar exchange rate and a drop in markets because of the uncertainty over the future of the eurozone.
Odey Asset Management has disclosed a net short position of 175m Bank of Ireland shares since June 10, according to Central Bank figures. This equates to 0.54pc of the value of the bank and represents a €60m plus exposure. Odey declined to comment.
The BoI share price has risen slightly this month, as the bank's chief executive Richie Boucher continues to improve its financial situation.
Boucher has turned around the bank since taking over, repaying the taxpayer funded bailout and generating a profit for the State on its investment.
The bank has moved from survival mode into a new growth phase and is expected to announce plans to pay a dividend next year for the first time since the crisis.
Crispin Odey is perhaps the best-known hedge-fund manager in Europe, with Odey Asset Management making a fortune by predicting the financial crisis and starting to short bank stocks in 2006 a full year before cracks appeared in the banking system.
He took large positions against HBOS and Bradford & Bingley, which later saw their share prices decimated. Odey generated investor returns of more than 54pc in 2008 - picking up a pay cheque of about €39m for his trouble.
He set up Odey Asset Management in 1991 with backing from legendary investor and financier George Soros. The firm has grown to become one of the largest hedge funds in Europe, with over €11.5bn in funds under management. Odey is said to personally manage funds of close to €4bn.
While the Mayfair-based hedge-fund manager has made vast profits from contrarian investment decisions, it could face a bear squeeze if markets bounce back because the Greek crisis is less catastrophic than previously thought. A bear squeeze is when share prices rise because it is known that investors have sold shares in a company without actually owning them, hoping to be able to buy them more cheaply later, before they have to deliver them to the buyer.
As the market becomes aware that these investors will have to buy the shares, the price is forced up.
Market sources have told the Sunday Independent that another major London hedge fund was caught in a bear squeeze earlier this year when it tried to bet against BoI. The bank's share price has risen 20pc since the end of January.
Sunday Indo Business