A wave of takeover bids at UK companies targeted by short sellers has caught out hedge funds including Millennium Management, GLG and Gladstone Capital Management, prompting others to think twice about betting against UK stocks, according to a report by the Financial Times.
The three firms were caught out by offers for financial services company Hargreaves Lansdown, cyber security provider Darktrace and video game services company Keywords Studios, sending their respective stock prices soaring.
While hedge fund managers agree that all three companies are facing challenges, their low share prices have also caught the attention of foreign rivals or private equity buyers, making bets on declining share prices a risky business.
The report quotes one hedge fund executive who specialises in short selling: “Shorting any UK mid-cap is insane, literally insane”.
According to data from the London Stock Exchange Group, M&A involving UK targets is 84% higher this year than it was during the same period in 2023, with the surge driven largely by the significant valuation gap between UK stocks and markets elsewhere — particularly the US.
