Whitehaven’s hedge fund bete noir sells down $260m shares

afr.com:

Bell Rock Capital Management has almost halved its investment in Whitehaven Coal just days after successfully pushing for a protest vote against the company in response to its plan to buy two major mines.

The size of the stake in the coal miner held by the London-headquartered hedge fund has been in focus after Whitehaven complained to the Takeovers Panel that Bell Rock may have misled investors as it campaigned for the abandonment of a $6.4 billion deal to acquire the two coking coal mines.

Paul Flynn (left) and Mark Vaile, Whitehaven’s chief executive and chairman, had accused Bell Rock of controlling twice the number of shares it had told investors that it held. Michael Quelch

Whitehaven told the Takeovers Panel that Bell Rock had privately boasted of controlling close to 11 per cent of the miner – once derivatives and ordinary shares were tallied – but had told investors it owned only half of that.

On Monday, Bell Rock disclosed it had been holding more than 39.4 million derivatives linked to Whitehaven shares, in addition to just over 40 million ordinary shares in the company. However, the disclosures also show that the fund sold 35 million shares worth almost $260 million on the same day.

The hedge fund said it had reduced its holdings to 5 million ordinary shares on Monday, taking its overall stake Whitehaven to 5.31 per cent. The hedge fund described the derivatives as “cash settled total return swaps”.

Bell Rock said it had acquired the derivatives at an average price of $7.72 per share; Whitehaven shares closed at $7.70 on Friday.

Whitehaven shares were down 3.8 per cent on Monday afternoon at $7.43.

Bell Rock did not provide an explanation for how those swaps worked, but they are likely to be an instrument