November 5, 2015 / 10:22 AM / 4 years ago

Hedge funds Odey and Eminence stand to profit from TalkTalk's woes

LONDON (Reuters) - Hedge funds Odey Asset Management and Eminence Capital LP are among those that could be profiting from a slump in the shares of telecoms group TalkTalk after its cyber attack last month.

Data from Britain’s Financial Conduct Authority (FCA) showed that billionaire trader Crispin Odey’s eponymous company and Ricky Sandler’s Eminence Capital had “short positions” of 1.7 and 1.8 percent respectively in TalkTalk on Oct. 29 and Oct 30.

Based on a decline of some 100 million pounds in TalkTalk’s market capitalisation from last week, those “short” bets from Odey and Eminence Capital could now be yielding profits of several million pounds, according to Reuters’ calculations.

Odey Asset Management and Eminence Capital declined to comment on their positions in TalkTalk.

British politicians said on Wednesday they would hold an inquiry into the circumstances surrounding the cyber hack on TalkTalk, in which hackers got access to the bank details of some of the company’s customers.

To profit from a stock price falling, short sellers such as hedge funds can borrow the stock and sell it, expecting it to decrease further in value so they can buy it back at a lower price and keep the difference.

“Odey has a great track record, so the fact that he is involved means TalkTalk could be a good ‘short’ play,” said Securequity sales trader Jawaid Afsar, referring to previous successful bets from Odey who made millions by betting on banks falling during the 2007-2008 credit crisis.

TalkTalk shares closed at 241.40 pence on Oct. 29, when Odey’s stake was disclosed to the FCA, and at 253 pence when Eminence Capital’s position was disclosed.

TalkTalk shares were down 7 percent at 237.37 pence on Wednesday, and they have fallen around 20 percent since the start of 2015.

FCA data shows that Odey has gradually increased his ‘short’ stake in TalkTalk, raising it to 1.7 percent from 1.3 percent on Oct. 23.

“You’d need guts to go ‘short’ on TalkTalk given the extent to which it has already fallen, but it could be worth betting on further falls if the stock breaks below the 230 pence level,” said Beaufort Securities’ sales trader Basil Petrides.

($1 = 0.6488 pounds)

Editing by Lionel Laurent and Mark Potter

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