Hedge Funds Place Big Short Bet on Italy’s Banca Monte Paschi

Hedge Fund Strategies 2012We broke the news about short sellers’ tilt towards Italian bank, Banca Monte dei Paschi di Siena SpA (BIT:BMPS), last Friday. Four hedge funds have a short bet in the bank, which was further increased, as Banca Monte Paschi came under investigations and reports of incumbent losses began circulating. Odey Asset Management, Egerton Capital, Wellington Management Company and Parvus Asset Management have  a short bet in Banca Monte. Egerton Capital increased the position from 0.7 percent to 0.97 percent of Banca Monte’s shares outstanding. Wellington Management increased from 0.58 to 0.7 percent on Jan 23. Crispin Odey’s Odey Asset Management recently acquired a 0.57 percent position, which was increased to 0.79 percent on Feb 1st. For full history of positions in Banca Monte, visit our page for hedge fund short positions.

Reuters further reports that the scandal around the bank involves a probe into an opaque series of dervatives and contracts issued between 2007 to 2009, the aftermath may cost the bank 720 million euros. The bank is also accused of overpaying on its acquisition of competitior, Antonveneta, at 9 billion euros, back in 2007. Banca Monte Paschi’s shares are one of the most in-demand shares for short selling, with 75 percent of them being out on loan. The bank’s troubled condition has also landed on the campaign agenda of candidates in the upcoming Italian elections. The short interest in Banca Monte Paschi was at its highest at the end of last year.

Banca Monte dei Paschi di Siena SpA (BIT:BMPS) fell 4.8 percent on Italian stock exchange today, and has detracted by -16 percent in the last 30 days. On Saturday, a court ruled that Italy’s bailout package could be used to salvage Banca Monte Paschi out of its financing problems. Bonds worth 3.9 billion euros will be used to bailout the bank.

Other Italian banks which are targets of shortselling are, Banca Carige SpA (BIT:CRG), a short bet of Wellington Management.  Banca Popolare di Milano (BIT:PMI) is held by Oxford Asset Management and Discovery Capital.