Royal Mail parent company International Distributions Services PLC (LSE:IDS) is being shorted by a New York hedge fund, which is likely betting on the collapse of the postal service group’s £3.6 billion takeover.
Sessa Capital initially reported it had opened a 0.73% net short position with IDS last Friday, just days after the board recommended Czech billionaire Daniel Kretinsky’s offer.
Earlier this week, the investment group upped its position to 0.83%, with analysts labelling the move “bold” but “intriguing”.
“Sessa obviously thinks the bid is going to fail. That’s got to be their motivation,” an analyst told the Times.
“There are only two mechanical ways it fails — it doesn’t meet the shareholder acceptance threshold or the government blocks it. And you have to feel the government blocking it is the more likely route for success for Sessa.”
Under an FCA ruling, any short seller with a position of greater than 0.5% must disclose it publicly.
Sessa is the only investor to have revealed a short position in IDS, while the Royal Mail owner is the only company the hedge fund has disclosed taking a bet against.
Activity by the US hedge fund in the City has been light since its inception in 2007, but it has strayed across the pond a couple of times before.
Back in 2019, the group opened up a short position in Plus500 and a year later was involved in pushing Patrick Drahi into upping his takeover offer for Altice Europe.
Meanwhile, Kretinsky is set to meet with the UK's business secretary Kemi Badenoch to discuss the £3.7 billion deal.
Badenoch will meet with the 'Czech Sphinx' in the middle of next week, according to reports.
While the government has yet to raise any fundamental objections to the takeover, it will be reviewed under the National Security and Investment Act and could face more intense scrutiny following the culmination of the general election.