These are difficult times for bear raiders, especially those who play the dangerous game of attacking companies which have a very small proportion of their shares freely traded. Word has it that those short of White Nile will at 10am today be forced by the Stock Exchange to close their positions and deliver any outstanding stock to its owners. Market professionals predict this is likely to send shares in the oil explorer sharply higher, leaving the bears nursing heavy losses.
Bear raiders make money by selling shares they do not own in the hope of being able to buy them back at a lower price in the future. They keep the difference between the two prices as profit.
But this money-making strategy works only when the raider is allowed to borrow stock from shareholders, and investors at White Nile no longer support this. They have asked the Stock Exchange to enact a so-called "share buy-in" where the Exchange itself closes outstanding short positions by physically going into the market and buying back stock on behalf of the bears.
The problem for those still short of White Nile is that they will have no control over the price at which the Exchange closes their short position. The highest-profile bear of the oil explorer is Simon Cawkwell, nicknamed Evil Knievel. Since White Nile's float this year he has been sceptical that the company can successfully extract oil from its prospect in south Sudan. He and his fellow bear raiders may well be proved right but after today's "buy-in" by the Exchange they will not be able to profit from their hunch. Shares in White Nile rose 6.5p to 126.5p.
QXL Ricardo is another company where the bulk of its shares are held permanently by a relatively small number of investors. Two competing investment companies have built up near-30 per cent stakes in the online auctioneer over the past six months, sending QXL stock into orbit. In fact, they have risen nearly tenfold since November, leaving the loss-making company with a market value of more than £60m.
Bear raiders attacked QXL last week amid rumours that the online auctioneer was looking to raise fresh cash. But things have backfired badly for them as the company denied the speculation and the stock soared. The shares closed a further 295p higher at 3,675p yesterday. QXL said the rise was caused by "technical market issues not related to the operations of the company". Dealers believe the jump was caused by bear raiders rushing to close their positions. Given the lack of freely floating shares in the market the only way they could do this was by paying high prices for stock.
Elsewhere in the small-cap world, Nanoscience added 5.5p to 11.5p after the cash shell unveiled its first investment.
Nano has taken a £215,000 stake in AppliedSensor, a Swedish technology firm which is focused on developing and producing advanced gas sensors for equipment manufacturers. Corvus Capital, which has a shareholding in Nanoscience, added 1.75p to 10.75p after news of the deal was made.
Urbium added 72.5p to 772.5p as Investec Securities suggested the bars and clubs owner is worth up to 1,000p a share. Urbium has been in focus since Regent Inns tabled a 820p-a-share offer for the company this week. Although Urbium rejected the bid, traders hope that Regent Inns will soon return with a higher offer.
Christian Salvesen rose 3.25p to 65p thanks to an upgrade from ABN Amro. The Dutch broker raised its stance on the stock to "add" from "hold" and applauded recent results from the logistics group, which it said showed that Salvesen's recovery is on track. ABN estimates that the company can generate modest growth this year.
Meanwhile, the FTSE 100 rose 5.5 points to 5,009.2. BAT gained 22p and closed at an all-time high of 1,100.5p as Richemont dismissed rumours that it plans to sell its 18 per cent stake in the tobacco giant. "We have no intention of selling BAT shares", said Johann Rupert, the chief executive of the Swiss luxury goods group, as he unveiled its annual results.
Severn Trent put on 14.5p to 1,023.5p after Merrill Lynch suggested that disposals are on the way at the utility as its management focuses the company on its two principle businesses - namely UK regulated water supply and waste disposal services. The US broker believes any cash raised from asset sales will be returned to shareholders.
Rumours that Icelandair plans to launch a takeover offer for easyJet continued to drive shares in the no-frills airline. They finished 10.75p higher at 245.5p. Woolworths, off 0.75p at 35.5p, saw Deutsche Bank ups its stake in the retailer to 19.2p. Bulls of Woolworths are hoping that Apax Partners will return with a fresh offer for the company.Reuse content