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Short sellers have amassed a record bet of almost €1bn against the shares of Telecom Italia, as chief executive Pietro Labriola seeks investors’ backing for an asset sale to slash debt.
Data from S&P Global indicated that a fifth of the company’s stock — totalling €930mn — is being targeted by short sellers, who typically borrow shares in order to sell them, buying them back later to profit from a decline.
The 19.33 per cent of Telecom Italia’s shares on loan as of Wednesday is the highest proportion in data going back to 2005.
Short sellers include Canada Pension Plan Investment Board and London-headquartered hedge fund Qube Research & Technologies, which are betting against 0.5 per cent and 0.72 per cent of Telecom Italia’s shares respectively, according to regulatory filings on Wednesday.
The proportion of the company’s shares on loan is far higher than the 11 per cent at UK rival BT and around 0.5 per cent at Germany’s Deutsche Telekom.
Bets against the stock have almost doubled since investors balked at Labriola’s three-year turnaround plan, which was unveiled this month.
Labriola’s proposals include the sale of the junk-rated group’s landline network to US private equity group KKR and a reduction in net debt from €20bn to about €7bn by 2026. Analysts had expected the debt to come down faster.
The announcement of the plan led shares to plunge 24 per cent on March 7. Telecom Italia’s biggest shareholder, French conglomerate Vivendi, opposes the network sale.
Italian finance minister Giancarlo Giorgetti argued on Wednesday that although the government backs the landline sale to KKR, it was up to the market to decide the future of the former state monopoly.
“We have done what the state was supposed to do, now investors will evaluate,” he said.
The Italian government, which can veto deals involving telecommunications infrastructure, plans to take a 20 per cent stake in the network company.
Investors and the board have frequently clashed on how to tackle the group’s debt mountain.
Labriola told the FT last year the network sale was a last resort to save the company, which burns through €3mn per day. His predecessor was ousted in 2021 after backing an earlier proposal from KKR to take the entire company private.
Under European law, short positions worth more than 0.5 per cent of a company’s share capital must be disclosed to the market.
The fact that only two funds have positions larger than the disclosure threshold indicates that a relatively large number of managers have taken out bets against the firm.
CPPIB and Qube declined to comment.
Three people with knowledge of the talks said Labriola met with Vivendi’s Yannick Bolloré to discuss the business plan on Wednesday.
Vivendi wrote off €728mn from its Telecom Italia investment in 2021. It has invested close to €4bn in the Italian company since first taking a stake in 2015.
Other investors have also pushed for a change of strategy. On Wednesday Merlyn Advisers, which owns a 0.5 per cent stake, presented an alternative business plan envisaging a break-up of the group, including the sale of its Brazilian operations and the fixed line network.