Hedge funds short troubled outsourcing firm G4S as shares drop

A pair of hedge funds has resolved to bet against G4S this year after setting up short positions in the beleaguered outsourcing company’s shares.

However, the firm’s shares are currently tempting just three hedge funds to hold large short positions, which involve loaning out shares in the hope of buying them back later, at a cheaper price.

CapeView Capital, a hedge fund run by former Deutsche Bank trader Theo Panos, declared a short position worth 0.5pc of G4S’s overall value on Christmas Eve. It joined Henderson Global Investors, whose trade was revealed to the financial regulator on December 21, and Ako Capital, which has been shorting G4S for more than two years.

Their contrarian positions are at odds with a number of the City’s biggest hedge funds, which have closed out their short positions in G4S in recent months. Blackrock, GLG Partners and Marshall Wace were among those cashing in their bets in 2015 as G4S's price dropped.

G4S has been trying to rebuild its reputation after scandals over the Olympics and prisoner tagging  Photo: Getty Images

G4S left the FTSE 100 last month after its market value became too small. Its shares have lost 17pc over the past year.

The stock continued to decline even after the group posted a 2.8pc rise in half-year revenues in August, with a 10pc rise in underlying earnings and a bullish tone about its growing order book in Asia and the Americas.

Ashley Almanza, who became chief executive after the Olympics debacle, has sold off a number of overseas businesses while dealing with the fallout from a scandal over criminal tagging.

G4S and its rival outsourcer Serco were temporarily barred from bidding for public sector contracts after they were accused of charging the government for tagging suspects who were in fact already in prison or dead.

CapeView spent about three months shorting Serco until February 2015, according to data from the Financial Conduct Authority. Serco, which has lost about 40pc of its value this year, is also struggling to recover after a £555m rights issue announced by its new boss Rupert Soames in November 2014.

Neither G4S nor CapeView responded to requests for comment.