Daily Mail - 12.08.2019

Page 66 Daily Mail, Monday, August 12, 2019

T

HE wider the Pandora’s
box lid opens at Neil Wood-
ford’s investment empire,
the worse it gets for the
fund manager.
The shares he owns have become a
target for short-sellers.
This is not in the least surprising, as every-
one knows he is trying to offload shares in
order to give his marooned investors their
money back. But those taking aim at Wood-
ford are not merely motivated by the fact he
is a forced seller.
carson Block, the founder of the Muddy
Waters hedge fund which short-sold one of
Woodford’s biggest holdings last week, also
reckons the fallen fund manager is a lousy
picker of small stocks.
Block and his short-sellers are not much
loved. They are a sub-set of investors who
feast on stock market carrion, making their
money by betting that prices of shares or
other assets will fall – in other words, they
profit on the misery of others.
The film The Big Short highlights the
moral dilemma. The short-sellers in the
movie, based on real individuals, are maver-
icks and social misfits. Their realisation –

ahead of the financial crisis – that the US

housing market was a bubble bound to

burst, was dismissed as lunacy by most

mainstream banks. It begs the question:

who are the real villains? The short-selling

predators, or the banks that sold the toxic

debts and gave them the opportunity?

Muddy Waters’ attack on Burford capital,

one of the few Woodford holdings which up

to that point had not gone south, is a clas-

sic of the genre. It put out a report accusing

the company of dubious accounting prac-

tice, being ‘arguably insolvent’ and having

‘laughable’ corporate governance.

Burford has issued a strong rebuttal, and

I wouldn’t presume to make a judgment in

this particular case, but short-sellers and

their close cousins, activist investors, have

been right plenty of times in the past.

on Woodford, my own misgivings were

first aroused in 2015 when I investigated an

investment he had made into a US firm

called Northwest Biotherapeutics.

A shadowy band of short-sellers calling

themselves Phase v Research had pub-

lished lurid claims about the firm, which

the Mail was unable to repeat for legal rea-

sons. All were denied by Northwest.

W

ooDFoRD – who at the time

had lost £46m – instigated a

probe into governance at the

company. He refuses to say

whether or not he still has a holding. Let’s

hope not: shares in Northwest peaked at

just over $12 in the summer of 2015 and are

now changing hands at just over 20 cents.

At the time of this incident, Woodford’s

flagship Equity Income fund was still doing

well. However, as I noted at the time, it

should have been a wake-up call.

There are potentially troubling aspects to

Selling Neil Woodford short

City Editor: Alex Brummer http://www.thisismoney.co.uk Business Editor: Ruth Sunderland

City Finance

Ruth

Sunderland

BUSINESS EDITOR

10.3pc

vacancy rate in UK’s

town centre shops – the

highest in four years

the short-sellers’ behaviour. In theory, they

can make allegations anonymously, against

good companies as well as bad, driving

down share prices for their own gain with

little fear of reprisal.

In practice, however, it often pays inves-

tors to take heed when the short-sellers

strike. They have been the canary down the

coalmine in collapses from AIM-listed insur-

ance company Quindell to the huge US

scandal at energy giant Enron.

carson Block believes short-sellers can be

a force for good, helping to tackle immoral

corporate behaviour.

of course they are not choir boys. What

they do is ethically ambiguous and not to

many people’s taste.

Similarly, activist investors, who take

stakes in companies then agitate force-

fully for change, are condemned as nui-

sances but frequently succeed in pushing

through improvements.

For the uncomfortable truth is that the

short-sellers have been far more effective at

spotting suspicious situations than the

auditors and regulators.

If they weren’t so useless, there would

not be such rich pickings for the short-

selling vultures.

by Matt Oliver

Ovo’s bid to take over

SSE’s 5.7m customers

Butlin’s family

pockets £102m

THE family owners of holiday

resorts chain Butlin’s have pocketed

£102m in a dividend bonanza.

Newly published accounts show

Bourne Leisure, which also owns

Haven and Warner Leisure Hotels,

paid £61.3m to shareholders in 2018

and another £40.8m after the year’s

end. It is thought to have mostly

gone to the secretive cook, Allen

and Harris families which control

the business.

The dividend payments came

after annual profits at the group fell

from £155.1m to £153.4m, despite

last year’s summer being one of the

hottest on record. Sales remained

almost flat at £1.1bn.

The Hemel Hempstead-based

company is the biggest leisure

group in Britain – employing 14,000

people during its busiest months –

and its holiday operations pull in

four million families every year. The

Harris family has an estimated for-

tune of £965m, according to The

Sunday Times Rich List, and the

Allens have £360m.

US raider takes

aim at Burford

ANOTHER vulture fund has attacked

Burford Capital just days after the

embattled legal firm’s share price

was cut in half.

Notorious short-seller Gotham

City Research said the litigation

finance specialist had ‘an absurdly

high valuation’ and revealed it had

bet against the shares last year.

It comes after fellow US preda-

tor Muddy Waters published a

damning 25-page dossier on Bur-

ford last week that criticised its

accounting practices – sending its

shares plummeting nearly 57pc.

London-listed Burford has hit

back and threatened to sue, accus-

ing Muddy Waters of making ‘false

and misleading’ statements.

New York-based Gotham City

previously published research

that led to investors wiping nearly

£1bn off the value of insurance

firm Quindell in a single day.

£250m deal will

create Britain’s

second-largest

energy supplier

troubled electricity and gas sup-
ply business which has been
haemorrhaging customers.
Privately owned ovo Energy
was set up by Stephen Fitz-
patrick, 41, in 2009 as an environ-
mentally friendly alternative to
its rivals. Its energy plans provide
at least 33pc of their power from
renewable sources and house-
holds can ramp this up to 100pc
by paying an extra £5 per month.
ovo is still majority controlled
by former city financier Fitz-
patrick, according to companies
House, but Japan’s Mitsubishi
corporation bought a 20pc stake
in May. That deal valued ovo at
£1bn, compared with SSE’s market
capitalisation of about £11.2bn.
SSE said in May that it was

putting its household energy

supply business up for sale after

revealing it had shed 570,000 cus-

tomers in just a year. It will focus

on generating renewable energy

and its power networks instead.

The ovo takeover would also

represent a landmark moment

for an energy industry that is

undergoing unprecedented tur-

moil. The so-called Big Six sup-

pliers – British Gas, Eon, Npower,

SSE, Scottish Power and EDF –

have been hammered in recent

years by competition from smaller

upstart rivals and the Govern-

ment’s energy price cap, amid a

public outcry over price rises.

It has resulted in millions of

households regularly switching to

cheaper deals, with the number

of switches hitting a record high

of 5.9m in 2018 – up from 3.2m

just four years previously.

Tim Dunford, an energy expert

at switching service Uswitch, said:

‘SSE have been looking for a fresh

start for their retail energy busi-

ness for the best part of two years.

‘If this deal does materialise, ovo

may well bring a different feel to

what SSE customers have been

used to, as one of the companies

at the forefront of technologies

such as smart meters and electric

vehicles. But households would

most want to know about the

price they’re paying and the cus-

tomer service they’re getting.’

An ovo spokesman declined to

comment on the takeover plans

last night.

SSE confirmed it was in talks

but insisted ‘no final decisions

have been taken’.

A spokesman added: ‘The board

remains focused on securing the

best long-term future for the busi-

ness, its customers and employ-

ees, and for shareholders.’

Fitzpatrick does not take a

salary and an ovo spokesman

refused to disclose how he was

paid. But in 2014 he raised £2m to

buy a house by selling ovo shares

back to the company.

The chief executive also bought

Formula one team Manor Racing

in 2015 and loaned it £19.4m, but

it went bust just two years later.

cHALLENGER energy firm ovo

is plotting a takeover of SSE’s

domestic supply business in a

deal that will create a new rival to

British Gas.
ovo, which last reported annual
profits of £6m, is understood to have
offered £250m to its much bigger rival
as well as additional payments that
so far remain secret.
If successful, the ambitious move would
bring more than 7m households under
the enlarged firm – second only to British
Gas’s 12m – and allow SSE to offload its

HOW THEY COMPARE

Stephen

Fitzpatrick

41

1,900

£834m

*

£6.1m

*

1.5m

£1bn

Boss

Age

Staff

Revenue

Profit

Customers

Value

Alistair

Phillips-Davies

52

20,000

£7.3bn

£1.4bn

5.7m

£11.2bn

Stephen

Fitzpatrick

of Ovo Energy

Stephen

Fitzpatrick

of Ovo Energy *2017*2017

Alistair

Phillips-Davies

of SSE

Alistair

Phillips-Davies

of SSE