Hedge funds call billionaire bluff as they bet £115m against Royal Mail

Hedge funds besiege Royal Mail as its biggest investor, Czech billionaire Daniel Kretinsky, faces financial pressure from war in Ukraine

Under pressure: Daniel Kretinsky with his girlfriend Anna Kellnerova

Hedge funds besiege Royal Mail as its biggest investor, Czech billionaire Daniel Kretinsky, faces financial pressure from war in Ukraine.

Kretinsky made his money in the European energy industry and is known as the Czech Sphinx because he is famous for his pinched mouth. He acquired a 20% stake in the delivery group.

There has been speculation it could try to buy Royal Mail or force it to divest its £4billion European GLS parcels business.

But secretive fund giants appear to be calling his bluff as Russia’s invasion could put financial strain on parts of his business empire – which have links to Russian gas giant Gazprom.

Short sellers including Marshall Wace, BlackRock, Millennium Capital and Man Group took a combined bet of £115million against the postal operator, or 3.4% of the shares. Data from IHS Markit shows this to be the highest level since September 2020. Short sellers are trying to profit by betting on falling company stocks. Royal Mail is facing pressure from rising labor and fuel costs amid pressure from unions and the bite of inflation.

But Kretinsky himself also feels the pinch. Its £2.7bn EP Infrastructure (EPIF) owns 49% of Eustream, which operates a system to deliver Russian gas to central and eastern Europe via Slovakia.

Rating agency Fitch has put EP Infrastructure on its “rating watch negative” list, signaling its large stake in the pipeline.

Fitch said tougher sanctions on Russia and Europe’s “increasing desire to reduce energy imports from Russia” could hurt Eustream and EP as there is an increased risk that Gazprom will not be able to honor its contracts.

But EPIF sources played down Fitch’s concerns. Gas transmission accounts for only about a third of profits, the sources said, adding that EPIF is part of the EP Holding group which includes a power generation business which is seeing revenue growth during the energy crisis.

Kretinsky, 46, who also owns a 10% stake in Sainsbury’s and 27% of West Ham United, as well as Sparta Prague football club, is believed to be worth £3bn. His girlfriend is show jumping champion Anna Kellnerova, 25, daughter of the late Czech businessman Petr Kellner, once the country’s richest man.

He grabbed shares of Royal Mail in May 2020 as the pandemic boosted demand for online shopping, boosting the postal company’s profits. Within months, he had become Royal Mail’s biggest investor. Its stake dipped above 20% in January.

Kretinsky confirmed the initial purchase in a statement, but did not give a reason for his interest and has not commented since. In an unusually candid statement, a spokesperson for EP Holding – of which Kretinsky is chairman and majority shareholder – said: “There is no connection between EPIF’s rating change and any stock price movement or activity. of the Royal Mail action.”

The spokesman said the EP’s business was “run completely separately” and that Kretinsky’s stake in Royal Mail is held through his investment firm Vesa.

He added: “Gas deliveries from Ukraine via the gas transmission network operated by the EPIF Group continue uninterrupted and the financial and operational performance of the EPIF Group has not been significantly affected by the situation. current.”

In 2020, it was rumored that Kretinsky was interested in buying the American chain Foot Locker and had also tried to buy the German retailer Metro.

The Communications Workers Union, which represents postal workers, is seeking a new pay deal, with its current deal ending this month. He is pushing for higher wages to match inflation and higher overtime rates.

As a result, Gerald Khoo, an analyst at private bank Liberum, cut his profit forecast for the next two years by £329m. In a note advising customers to sell the stock, it said: ‘Royal Mail has very limited scope to adjust its prices to compensate for more costly pay settlements in the UK.’

JPMorgan analysts have warned that a reduction in parcel volumes and deliveries of Covid test kits could affect revenue, but they still think Royal Mail’s long-term outlook is positive.

The largest short position is a £58m bet against shares in Marshall Wace, the influential hedge fund set up by Brexit tycoon Sir Paul Marshall and his business partner Ian Wace.

Marshall Wace’s position was first disclosed in January, with the remaining trio of funds emerging over the past two months. The funds will have already seen a paper profit from their bets, as the stock has fallen 28% to £3.54 since January 10, when the first short position was disclosed.

Postman takes aim at company’s ‘bullying culture’

Resignation: Christopher Davies

Resignation: Christopher Davies

A postman has denounced the ‘culture of bullying’ at Royal Mail after resigning from a 32-year career with the business.

Christopher Davies accused his managers of bullying when he returned to work after taking leave immediately following the death of his infant grandson in 2019.

‘I was very distressed to see my child holding his son as he passed away,’ he told the Mail last Sunday. “I had several meetings with my managers in which they repeatedly upset me and showed no empathy for the loss of my grandson. It’s disgusting the way I was treated and it comes from a culture of intimidation.

Davies, 56, who lives in Essex, quit last week after being laid off for seven months due to stress.

Last year, Royal Mail chief executive Simon Thompson pledged to root out long-standing issues with bullying at the 500-year-old business.

Last year, a former Royal Mail manager was awarded nearly £230,000 after a court ruled he faced workplace harassment and discrimination.

A Royal Mail spokesperson said: ‘We are committed to creating a working environment where all of our colleagues can thrive and do not tolerate any form of bullying or harassment.

“We thoroughly investigate all reported allegations of such behavior and then take appropriate action in each case.”