Hedge fund short-sellers have sucked up almost all the available shares in Peugeot as they rush to bet that the car company will be one of those that will succumb early as the industry suffers a plunge in European sales. Peugeot is now one of the most in-demand stocks in Europe for short-selling by hedge funds, with 92% of shares available to borrow - the "lending pool" supplied by institutional investors - now out on loan, according to data group Markit.
Due to the rush by hedge funds to acquire Peugeot stock, prime brokers have been forced to meet some of the demand by using their own supplies. Prime brokers are the providers of finance and lend stock to hedge funds. The Peugeot lending pool accounts for 12% of the company’s market capitalization totalling 2.17 billion euros.
About 18% of Peugeot stock is currently out on loan. The short-sellers include hedge fund Marshall Wace, which has a net short position of 0.76% of the automaker’s total share capitalization. It was recently disclosed that Odey Asset Management holds 2.66%, while Egerton Capital has 0.7% and DE Shaw has 1.4%.
Duncan Wilson, the head of equity finance sales trading at JPMorgan prime brokerage, said that most of the Peugeot lending pool has been borrowed, by a combination of directional and event-driven funds, at which point stability turns into a possible issue.
While the car demand has fallen nearly to its lowest in 20 years, Peugeot is one of those who were hit the hardest by the debt crisis in Europe. In addition, consumer spending is affected by the austerity measures. This region made up about 59% of its sales volume last year.