DE Shaw disclosed this morning that it now has a ~$100 million short on Barclays.
From the Telegraph:
DE Shaw disclosed that it had built a 0.26pc short position. The position is worth £97m after Barclays’ shares closed down 4.4 at 306.6p on Monday.
It’s not every day that a hedge fund manager makes a short public. (UPDATE: But DE Shaw is required by law to disclose shorts on UK financial firms.) David Einhorn, for example, usually only publicizes a couple of his shorts at a time (he’s shorting St. Joe’s right now, for example, but if he were asked about other shorts, he would probably decline to comment).
So it seems like DE Shaw is trying to get others on the same bandwagon they are.
The fund didn’t give a reason to for the short, nor do we know who it was disclosed to other than the Telegraph (probably just investors) but it’s probably because of the general opinion that the European financial sector is unstable and because:
- the stress tests didn’t really test anything (Noster Capital manager Pedro Noronha is also shorting Barclays for this reason)
- the impact of Basel III rules is uncertain
- there’s a mini exodus out of the UK to other Euro countries
Also, John Paulson made billions in 2010 shorting European financials and since everyone knows his name and has been following his trades since he won big in 2007 and 2008, it’s pretty safe to assume that being in anything he’s winning on publicly on won’t end up in embarrassment.
Obviously, DE Shaw might have come up with this on their own for the three reasons given above and/or another, but still, John Paulson went public with his Euro bank short a couple of weeks ago.