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Hedge funds’ 1bn HBOS killing

Independant- Hedge funds may have made more than £1bn from shorting shares in HBOS, whose £4bn rights issue faced intense pressure from investors betting on the share price falling.

Almost 15 per cent, or about 550 million, of the bank’s shares are out on loan, according to Data Explorers. That stock will mainly be lent to funds who have sold the shares expecting to buy them back cheaper.

HBOS’s last closing share price before the cash call was announced was 495.24p, but the shares plunged during the rights issue process. At the closing price of 264.5p yesterday, short funds who bought at the closing price before the cash call was announced on 29 April would have made 230.74p a share, or a total of £1.27bn.

Six funds have announced positions since the Financial Services Authority changed its rules to require the declaration of short holdings over 0.25 per cent for companies undertaking rights issues.

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