INVESTORS are betting about 865 million pounds (US$1.61 billion) that United Kingdom home builders, such as Barratt Developments Plc, will continue to slide this year, with some of the steepest drops hitting companies that have fallen the most, according to research company Data Explorers.
Stock equal to about 19 percent of the market value of the seven UK publicly traded home builders is on loan, according to the London-based company, which analyzes data on shares borrowed. That's about 45 percent higher than at the start of May.
Investors bet on a stock's decline through a short sale, which involves borrowing shares and selling them on the expectation that they can be repurchased later at a lower price before paying back the loan, with the borrower pocketing the difference, Bloomberg News reported.
More than 62 percent of the stock available to borrow in Barratt Developments Plc, Persimmon Plc, Bovis Homes Group Plc and Redrow Plc was now on loan, Data Explorers said.
"Short selling had a massive impact on way these stocks collapsed in June; it was crazy," Robert Gardiner, an analyst at Davy Stockbrokers in Dublin, said by phone. "With falling house prices, and so possible land writedowns, short sellers got hold of that and drove them down further."
Barratt's share price has more than tripled since July 8, after it was pushed to record lows amid concerns over high levels of debt and land writedowns in the UK's most widespread housing slump in three decades.
The amount of UK home-builder stock on loan as of August 13 was similar to the levels in late June, before the companies were pushed to record lows in London trading. The most heavily borrowed stock is Bovis Homes Group Plc, with a utilization figure, or the percentage borrowed from the total available, of 67 percent. That equals 26 percent of its market value.
Taylor Wimpey, which has 17 percent of its market value on loan, slipped as much as 7.5 percent and changed hands 5.4 percent down at 44.25 pence yesterday in London trading. Redrow fell 4.8 percent, Persimmon 4.5 percent and Barratt 4.3 percent to 123.75 pence.
Berkeley Group Holdings Plc and Bellway Plc have the smallest bets against them. Berkeley's utilization figure is 40 percent, or 14 percent of its market value, with Bellway on 26 percent, or 7.3 percent of its value.