A second hedge fund bets against WPP as stock touches three-year low

Marshall Wace has become the second hedge fund to bet against WPP's shares in the space of two months.

The U.K.-based hedge fund has shorted 0.51% of WPP’s stock, according to a disclosure to the U.K.’s Financial Conduct Authority.

Marshall Wace first disclosed its short position to the FCA on October 27 and increased it fractionally on November 13, filings show.

Lone Pine Capital, a U.S. hedge fund, has also had a 0.51% short position against WPP since September.

A hedge fund that shorts a stock price is betting that it will fall further in value.

WPP, the world’s biggest advertising group, has already seen its valuation drop by more than a third to £16 billion since March.

The WPP share price peaked at £19.21 at the start of March, suffered an 11% drop in August after warning of a slowdown in spending by FMCG companies, and has continued to slide, touching a three-year low below £12.50 during trading on November 16

A hedge fund would have to bet about £80 million to short 0.5% of WPP.

The FTSE 100 company has spooked investors by reporting two consecutive quarters of falling net sales and has cut its annual revenue growth forecast from 2% in March to "between zero and 1%" in August and then to "broadly flat" in October.

WPP gave a robust defense of its business in a presentation to financial analysts at its third-quarter results, playing down fears that Google and Facebook or management consultancies could disrupt the agency model.

Paul Richards, an analyst at Numis Securities in London, said in a research note after WPP’s Q3 results that there was still "continued market concern over medium-term headwinds" and "structural challenges" such as FMCGs cutting spend and media agency transparency.

However, Brian Wieser, an analyst at U.S. firm Pivotal Research, said, "Businesses we call ‘agencies’ can be remarkably entrepreneurial, providing us with some confidence that new sources of revenue which are either modest today or not yet established will expand or emerge in some form."

Wieser rates WPP’s shares a "buy" and has set a target price of £15 for the stock.

WPP declined to comment.

This story first appeared on campaignlive.co.uk.

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