Hedge funds made quick cash last week, shorting shares of the Royal Bank of Scotland.
Word traveled fast that the U.K. government was selling some of its 78% stake in RBS, triggering hedge fund bets that the sale would drop the share price, reports the Financial Times. Shares of RBS did fall 8% between last Thursday’s open and Monday’s close. Shares used for short selling the stock almost doubled to 1.8% at the end of last week. About 68 million shares, worth about £230 million, were used to short RBS.
But the hedge funds’ gain came at the tax payers’ loss. The government took a £1.1 billion loss on its £2.1 billion share sale Tuesday, when is sold 636 million shares at 330 pence each to institutional investors. The government paid 502 pence seven years ago to bail out the bank.
Photo: Elliott Brown