Hedge Funds Drop B&O Short Bets as Selloff Creates Opportunities

  • Short positions in B&O shares have dropped to one-year low
  • B&O says no new developments in takeover talks since November

Bets against Denmark’s luxury stereo maker, Bang & Olufsen A/S, are at their lowest in 12 months.

This year’s equity market selloff has given some of the hedge funds who were wrong-footed by reports of a potential takeover of B&O a chance to reduce their short positions. Contracts are now at a one-year low of 4 percent, according to data compiled by Markit and Bloomberg.

“It’s obviously risky to be short in a stock during a possible takeover process,” Ole Kjaer Jensen, head of share trading at Sydbank, said by phone. “It seems there are some investors who have taken advantage of the recent market uncertainty to close down their short positions on B&O.” 

The Danish maker of high-end televisions and audio equipment said on Nov. 26 it was approached about a possible takeover. Jan Helleskov, B&O’s chief spokesman, said Thursday there was nothing new to report on the talks and declined to comment on the short interest in the stock.

“The current share price doesn’t yet indicate that the market sees an imminent deal coming up,” Jensen at Sydbank said. “If that were the case, it would trade higher.”

Danske Bank A/S said in November B&O’s takeover price should be above 100 kroner “to reflect values.” The stock closed at 68 kroner Thursday, up from a 2016 low of 59 kroner on Feb. 9.

The practice of short-selling involves an investor borrowing a stock and selling it, acting on a bet that its market value will fall. If the bet pans out, the investor then repurchases the stock at a lower price, returns it to the source from which it was borrowed, and pockets the difference between the sale and repurchase price.

Firefly Value Partners’ FVP Master Fund has the biggest short bet against B&O, according to the website of the Danish Financial Supervisory Authority. Its position is equivalent to 1.97 percent of the shares, a Jan. 11 filingshows. The fund has been betting against B&O since at least October 2014. Firefly declined to comment on its investments when contacted by phone.

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