A small group of hedge funds who patiently waited have struck gold from their gamble on Monday when the French carmaker’s stock lost around tenth of its value.
Several hedge funds had their bets on future slides in Peugeot stock, choosing to terminate their short positions after the rumored turnaround at the group and speculation about the arrival of prospective new investors managed to increase share value in July.
But on Monday, PSA declined to a 5-1/2 week low. This was because a report surfaced, saying that Peugeot was readying a 3 billion euro ($4.1 billion) capital hike in which Chinese partner Dongfeng Motor (0489.HK) and the French state would take matching stakes in the ailing automaker.
Just a few months ago, Peugeot was among the most shorted stocks across Europe, with short-sellers hovering up nearly all-available shares, betting on the prospects the carmaker would not manage to pull through the still ongoing collapse in European car sales.
However, the July increases dismissed the fortunes of some hedge funds that decided to leave their short positions. This downsized the level of Peugeot shares on loan to only 8 % now from around 18 % early this year, according to data from Markit.