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U.S. hedge fund takes HSBC short, repeats HBOS ploy

Date: Tuesday, March 10, 2009
Author: Steve Slater, Reuters

U.S. hedge fund Harbinger Capital is the first company to declare a short position in HSBC (HSBA.L) (0005.HK) following the bank's record rights issue, after making millions from a similar tactic with UK bank HBOS last year.

Harbinger said in a regulatory filing it has taken a 0.26 percent short position in HSBC's London shares, worth about 110 million pounds ($157 million). By 0910 GMT the shares were up 2.5 percent at 356 pence.

Harbinger has also unveiled a series of short positions in Spanish banks in recent weeks, including a short position of 1 percent in BBVA (BBVA.MC) and 0.4 percent in Santander (SAN.MC).

It has also been declaring almost on a daily basis short positions in other Spanish lenders, particularly in Banco Popular (POP.MC) and Sabadell (SABE.MC).

The hedge fund -- run by Philip Falcone, who was one of five hedge fund managers quizzed by U.S. lawmakers last November -- took a 3.3 percent short position in HBOS during last summers's rights issue.

It bet 345 million pounds ($490.7 million) on the stake, and HBOS shares fell sharply in the subsequent months as the rights issue flopped. A takeover by Lloyds offered only brief respite, and the stake is now worth about 35 million pounds in Lloyds (LLOY.L) shares.

Harbinger never disclosed if or when it bought the shares back. It could not immediately be reached for comment.

Former Harvard hockey star Falcone's shrewd housing market bets at Harbinger netted him a $1.7 billion payout in 2007, according to Alpha Magazine. [ID:nN16372761]

Harbinger's parent group Harbert Management Corp, based in Alabama, manages about $9 billion in assets, according to its website.

One fund focuses on distressed, undervalued or special situation assets, and the other focuses on longer-term investments including special equity situations.

It sells short securities when a company's deterioration or industry fundamentals are not reflected in its current price, the website said. ($1=.7030 pounds) (Reporting by Steve Slater in London and Judith MacInnes in Madrid; Editing by Greg Mahlich)