Delivery franchise Domino’s Pizza is the UK’s most shorted public company despite the beleaguered franchise having launched a major buyback to prop up its share price last month.
The FTSE 250 constituent’s shares are already languishing at a 10-year low as the firm battles to fend off a litany of headwinds including rising labour costs and anaemic consumer confidence.
But several investors also expect Domino’s market capitalisation to plunge new depths, after Financial Conduct Authority data showed big-name hedge funds were betting against it more than any other stock on London’s main market.
Investment juggernaut Blackrock, Ken Griffin’s Citadel and Marshall Wace – the British hedge fund run by GB News proprietor Paul Marshall – were among 10 investment firms to have disclosed major short positions in excess of 0.5 per cent of Domino’s market capitalisation.
Hedge funds are obliged to disclose any significant bet against London-quoted companies to the FCA. And according to data that the watchdog publishes daily, investors have shorted at least 10 per cent of the delivery giant’s total stock, the equivalent of £75m in short positions.
Domino’s balancing franchise and shareholder returns
Domino’s top brass have been locked in a battle to arrest a declining stock price that has been weighed down by a bleak trading environment for retail and hospitality firms and an increasingly competitive home delivery and fast food landscape.
Shares are down by 24 per cent in the past three months alone, despite the company’s board signing off on a £20m share buyback programme in September, saying the pizza group remained “highly cash generative”.
“The London-listed stock owns the UK and Ireland master franchise and has been through a difficult period after it got into a dispute with franchisees over profit-sharing and expansion plans,” Russ Mould, investment director at AJ Bell, told City AM. “Last December, Domino’s announced a new five-year framework deal with franchise partners, which looks to have helped repair relationships but raises costs for the listed company.”
The group, which owns the master franchise of the US takeaway giant, was last month dealt a downgrade by analysts at Deutsche Bank, who re-rated the stock from a ‘buy’ to a ‘hold’, saying that the recent deal to hand franchisees more profits would come at the cost of shareholder returns.