Short Sellers Target Metro Bank Ahead of Key Shareholder Vote on Refinancing Plan

Short Sellers Target Metro Bank Ahead of Key Shareholder Vote on Refinancing Plan #

Metro Bank is facing intense scrutiny from short sellers as it approaches a crucial shareholder vote on a significant refinancing plan. The Financial Conduct Authority’s filings reveal that the bank is the second most shorted stock in the London market. Approximately 6.4% of Metro Bank’s shares are in the hands of hedge funds like Caius Capital and Kite Lake Capital, who are speculating on a decline in the stock’s value. This short-selling strategy involves borrowing and selling the stock, then repurchasing it at a lower price, profiting from the difference.

Currently, Metro Bank’s shares are valued at 38p, a steep decline of over 69% this year and a dramatic drop of more than 98% over the past five years. This downturn followed reports of the bank seeking additional capital to strengthen its financial position. In response to these challenges, Metro Bank announced a major refinancing deal in early October, including a £325 million capital injection led by Spaldy Investments and £600 million in debt refinancing. This move resulted in Jaime Gilinski Bacal’s Spaldy Investments becoming the controlling shareholder with a 53% stake.

The proposed equity raise is set to significantly dilute the holdings of current shareholders, while the bank’s tier 2 bondholders are expected to face a 40 to 45% loss. Although bondholders have endorsed the plan, it still requires approval from a majority of the equity investors. A Metro Bank spokesperson expressed confidence in the transaction, noting that investors representing about 36% of the issued share capital had pledged support for all resolutions as of November 9, 2023.

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