Short-sellers target Sainsbury's on Tesco fears

Since Dave Lewis was unveiled as the new boss of Tesco, the proportion of Sainsbury’s shares out on loan – a proxy for shorting – has risen and is approaching levels not seen since July 2006, when financial data group Markit began compiling its data.

Some 10.5pc of Sainsbury’s shares have been borrowed, up from 9.3pc on July 21, the day Tesco announced that Philip Clarke was being replaced by Mr Lewis as chief executive of Britain’s biggest retailer. Sainsbury’s is the single most shorted stock in the FTSE 100.

A host of hedge funds are betting against Sainsbury’s, including Lansdowne Partners, Marshall Wace and Odey Asset Management.

Short-sellers profit from falling share prices by borrowing stock and then selling it, in the hope that they will be able to buy it back at a lower price and pocket the difference.

Sainsbury’s shares have fallen 6.9pc since Tesco unexpectedly unveiled its new boss, while Morrisons is down 4.7pc. The proportion of Morrisons shares on loan has edged up to 7.6pc from 7.2pc during the same period.

While shares in Tesco, which sounded a profit warning at the same time as naming its new boss, have dropped 13.3pc and hit a 10-year low, the percentage of shares that have been borrowed has also dipped to 2.2pc from 2.6pc.

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