Daily Telegraph- Hedge funds are finding it impossible to take out new short positions in Northern Rock’s shares.
One analyst said this was because some Northern Rock stock is owned by individuals, who have held it since it demutualised and do not want to sell now.
Several investors have bought in, apparently hoping there will be a Government rescue of Northern Rock. There are also fund managers who own the stock and are no longer willing to lend it out to short investors, sources said.
The lack of ability to short – where investors sell shares they don’t own in the expectation that they can buy them later at a lower price – is contributing to the perception that there is a false market in Northern Rock’s shares and increasing the volatility of its share price movement, sources said.
Northern Rock’s shares were roiled as the entire banking sector fell more than 3pc. Rumours of further write downs by some of the world’s biggest banks and rights issues swept the market. Meanwhile, investors are waiting anxiously for trading statements in the next few weeks for an indication of how well UK banks have held up against the difficult market conditions of the past few months.
