Hedge funds rubbing shoulders with betting shops! Whatever next?

London’s astute and precise hedge funds are making a beeline for Paddy Power and William Hill. Why on earth would they do that? The ‘new economy’ is a strange place.

Our Forex industry predictions for 2016 - A comprehensive global investigation

In the vast majority of countries around the world, betting and gambling are illegal activities, and quite rightly so.

It is therefore very surprising that in some of the world’s most civilized societies, it is not only legal, but is omnipresent in every high street of every town, and in advertisements from the bus stop to prime time television.

Betting shops, along with their their associated activity and lifestyle are some of the most seedy and unpleasant environments and in Britain (I would never go near one – Ed), are almost a taboo subject among social discussion, despite their huge stake in the UK economy.

It is therefore absolutely natural to consider London’s highly sophisticated hedge fund and investment management industry, a gentlemanly aura of elegance that operates from the white-pillared luxury of Belgravia and Marylebone, its ornate offices circumnavigating St James’ Park and representing the most quintessentially British aspect of London’s world leading, cutting edge and incredibly powerful financial sector.

Or is it?

Never the twain shall meet, so says the adage, however today represents the day when they just might.

Such is the dramatic change of direction in consumer activity and business strength due to the draconian lock downs that have forced the majority of commercial activity out of action, that the astute investors are looking ahead, to see what they can acquire for a low price now, and gain a huge return on as a result of the current situation as it develops.

People’s habits are being forced to change, and a new lifestyle of fear and uncertainty has been foist upon the world via an iron fist, with absolutely no support for those who are financially affected.

One of those sectors is, believe it or not, the sports betting sector, which is now becoming a very interesting proposition for hedge funds.

The dishevelled, slurring, unkempt addicts in the smoke-filled room littered with paper slips suddenly meet the pin-striped, immaculately dressed Old Etonian bastion of accuracy and precision.

Flutter Entertainment, which owns high street bookmaker and sports betting company Paddy Power, has become the second most shorted stock according to declarations on the Financial Conduct Authority’s (FCA) shorting register during the past week, with funds and institutions shorting at least 13.5% of the shares.

William Hill, a rival to Paddy Power, whose share price has collapsed 141.7% this month, has a 2.17% net short.

Indeed, a large number of London based hedge funds and institutions are circling companies such as Flutter Entertainment, whose market value has fallen by a quarter in the past month due to its sports betting exposure.

It is very surprising that this direction has taken place, largely because during times at which the public and the workforce are subjected to dictatorial levels of confinement, those with destructive habits tend to accelerate them exponentially, but this has not been the case this time, and the hedge funds are capitalizing on it.

It is worth considering that the shorting of stock and buying at low prices could mean that investors may hang onto cheap stock, ride the low point and then as the unemployment levels increase and further levels of despair creep in, the dystopian array of people betting may increase, giving the hedge funds a clear win from everyone else’s loss.

This is a scenario which could have been considered absolutely improbable just a few weeks ago, however the interest in this is at an all time high at this extremely challenging time in global economics.

 

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