Cash-strapped package holidays giant Tui has come under attack from hedge funds hoping to cash in on a looming rights issue aimed at helping it to ride out the coronavirus crisis.
Bets against the FTSE 250 company have hit a record high after short-sellers rounded on the firm in recent days.
The increase in short positions – where investors bet on share price falls – follows confirmation from Tui’s chief executive Fritz Joussen that the firm is considering a rights issue after reporting a £1.3 billion loss for the three months to June.
Cash-strapped: Bets against the FTSE 250 company have hit a record high after short-sellers rounded on the firm in recent days
American billionaire Ken Griffin’s hedge fund giant Citadel Advisors and Swiss firm PSquared Asset Management have placed large bets against Tui shares in the last few days.
It takes the total disclosed short positions to 5.7 per cent of Tui’s shares, according to data from the Financial Conduct Authority – the highest level since the FCA began disclosing short positions in 2012. These are worth about £100 million
Tui’s shares have unsurprisingly suffered in recent months as the Covid-19 crisis battered shares in travel companies, which were already feeling the effects long before lockdown was introduced in the UK.
Earlier this month, Tui said it would ‘evaluate options to achieve the optimal balance sheet structure to support the business over the longer term’.
Joussen later confirmed this could mean raising cash via a rights issue or selling off parts of the company, such as Tui’s Marella Cruises.
Airlines and tour operators have been in crisis due to severe restrictions on international movement as a result of the pandemic.
Hopes that the situation was improving were dashed after the Government began removing some of the top destinations from the travel corridor list – countries exempt from quarantine requirements – to the dismay of the travel industry.
The Government has been adding and removing countries at short notice, throwing the travel plans of millions of Britons into chaos. Those travelling to popular hotspots such as France, Spain and now Croatia have to self-isolate for two weeks upon return to the UK.
Tui and other firms have called for the introduction of coronavirus testing at airports to reduce the need for quarantine.
Shares in several airlines rose last week on the news of possible testing at airports.
Tui declined to comment on the rise in short-selling