Hedge fund bets on fall in Ryanair’s share price

Citadel Europe disclosed to the Central Bank that it is shorting the airline

A Ryanair Boeing 737 aircraft approaches Paris-Beauvais airport in Tille, northern France. Photograph: Christian Hartmann/Reuters.

A Ryanair Boeing 737 aircraft approaches Paris-Beauvais airport in Tille, northern France. Photograph: Christian Hartmann/Reuters.

 

Citadel Europe, the hedge fund founded by billionaire Ken Griffin, has taken a 0.56 per cent short position in Ryanair, according to data disclosed to the Central Bank of Ireland.

A short position in a stock amounts to a bet that a company’s share price will fall.

Citadel, a $29 billion hedge fund, shorted Ryanair on Tuesday, the Central Bank data shows.

Based on Ryanair’s current market valuation of €13.2 billion, Citadel’s move amounts to a bet of about €74 million that the airline’s share price will drop.

Under the short selling regulations introduced in 2012 after the financial crisis, “significant” net short positions in publicly quoted companies must be disclosed to the regulator.

This is the first such disclosure in connection with Ryanair.

In February, Mr Griffin told investors in his annual letter that he expected heightened stock market volatility to create lucrative trading opportunities in 2019.

He cited Brexit as one of the key macroeconomic risks his fund would be monitoring, according to the Financial Times.

In January, Ryanair issued its second profit warning in four months, citing weak winter fares, with chief executive Michael O’Leary adding that further profit warnings couldn’t be ruled out if unexpected Brexit or security developments arose.

Ryanair’s share price closed at €11.66 in Dublin, up 2.3 per cent on the day. The airline’s share price is up 8.5 per cent so far in 2019, but fell sharply last year and in the latter months of 2017.

Analysts at stockbroker Davy said last week that they believe Ryanair’s share price could increase back to €15 as the airline increases its share of the European market and changes its structure to cash in on new opportunities.

They argued that the current price fails to reflect Ryanair’s capacity to grow and its potential to generate cash.

They also said Ryanair’s low costs give it a significant advantage over rivals, and that it would increase its share of European air travel to 16 per cent this year from 15 per cent in 2018.

Mr Furlong and Mr Harvey also said they expect a change in corporate structure that will see a holding company overseeing operating subsidiaries will offer scope for further growth.

The other Irish quoted companies where significant short positions are currently held are Paddy Power Betfair, food group Glanbia and Permanent TSB Group.