Hedge funds amass big bets against world’s leading advertisers

 In Advertising, International

Hedge funds have amassed bearish bets of more than $3bn against the world’s largest advertising companies in an attempt to profit as the industry undergoes wrenching disruption and slowing growth.

Funds including the UK’s Marshall Wace and the US funds Lone Pine and Maverick Capital have accumulated short sales of shares worth a combined €280m against France’s Publicis, according to regulatory filings, as the company’s shares have held their value as those of rivals’ have tumbled.

In contrast, shares in WPP plumbed a three-year low last week, having shed 10 per cent since the start of the year. Hedge funds that have borrowed shares worth £920m in order to sell them short have realised large gains, according to data from Markit. WPP recently released full-year results, which its chief executive referred to as “a walloping”, sending its share price sharply lower.

Hedge funds have also taken out short positions worth $2.2bn in the shares of Omnicom, equivalent to 13 per cent of its total shares, according to Markit data, as well as a $426m bet against the stock of Interpublic.

While selling short struggling advertisers has become a profitable trade for hedge funds, other investors have made large bets in the other direction, believing the concerns over the agency model will prove less severe than the market believes.

David Herro, chief investment officer at Harris Associates, holds a stake in WPP worth £766m as of Friday’s close, as well as a €755m holding in Publicis. Mr Herro has said that he does not believe the current share price of WPP reflects the true value of the company.

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