Funding Circle feels pressure as short sellers start to hover over lender

Mark Shapland
Funds are taking aim at Funding Circle: Getty Images

Short-sellers have taken aim at recently floated Funding Circle, placing millions of pounds of bets on the share price falling.

Latest data from research firm IHS Markit shows that 1.74%, or £22.6 million, of the peer-to-peer lending firm’s shares are out on loan as investors short the stock.

The firms doing the shorting and the dates they took their positions have not been revealed by the Financial Conduct Authority as each position is less than 0.5% and does not have to be publicly declared.

IHS noted that positions have started to grow since last Wednesday.

Shares in the fintech firm floated on the London Stock Exchange at 440p on September 28 valuing the business at £1.5 billion. Shares are now 402p.

Short-sellers make their money by borowing shares, selling them and then buying them back at a lower price. Analysts say the shorting shows that investors feel the stock has further to fall, adding that it is rare for investors to place bets against shares so soon after a flotation.

Russ Mould at AJ Bell said: “It’s a sign that some believe the shares have further to fall. It has never turned a profit and its valuation was a bit fruity.”

Funding Circle had to cut its IPO price range in the run up to its float as it is understood top institutional investors in the City were unwilling to pay top whack for a company which has yet to post a profit.

Among those who bought in at the float were Danish fashion magnate Anders Povlsen, who agreed to buy 10% of the company, and Old Mutual and Invesco Asset Management snapped up 7.5% and 5.2% respectively.

It has been a tough time for London’s float market with litigation funder Vannin Capital pulling its float last week, citing recent market volatility.