Published by Global Banking & Finance Review®
Posted on August 21, 2025
2 min readLast updated: January 22, 2026
Hedge funds targeted WH Smith for short selling before a profit warning revealed an accounting error, causing shares to drop 45%.
By Nell Mackenzie
LONDON (Reuters) -Hedge funds and speculators picked WH Smith as their top target for short selling in July, before the British travel retailer announced an accounting error on Thursday that sent its shares tumbling more than 45%.
WH Smith lowered its annual profit outlook on Thursday after a review revealed earnings had been overstated in its North America division.
Speculators in July picked WH Smith as their top target among UK and European small-cap stocks for bets on a share price drop, a research report from Hazeltree also on Thursday showed.
Hedge funds that had to disclose such bets in August to the UK regulator's public filings because of their size included Citadel Advisors and Man Group.
Analysts have cut target prices for WH Smith's stock and have pointed to how mounting debt has weighed on the company's cash reserves, compounding pressures from global economic uncertainty affecting the travel sector.
A financial review identified an overstatement of around 30 million pounds ($40 million) in expected headline trading profit, WH Smith said, mainly due to supplier income in North America being booked too early.
WH Smith, which in June sold its UK high street business to become purely a travel retailer, has been rapidly expanding in North America, which contributed about 20% of group revenue in fiscal 2024.
The retailer said it now expects group pre-tax profit for the year ending August 31 to be around 110 million pounds, compared to analysts' estimates of 156.9 million pounds, according to LSEG data.
Entertainment ticket sales companies, luxury drinks companies and semi-conductor manufacturers saw large portions of their stocks borrowed for the purpose of shorting, Hazeltree's Shortside Crowdedness Report showed.
It gathers data from 700 asset managers, covering 15,000 stocks globally.
Citadel and Man Group declined to comment. WH Smith did not immediately respond.
(Reporting by Nell Mackenzie. Editing by Dhara Ranasinghe and Mark Potter)
Short selling is an investment strategy where an investor borrows shares and sells them, hoping to buy them back later at a lower price to profit from the difference.
A profit warning is a statement issued by a company indicating that its earnings will be lower than expected, often leading to a decline in stock prices.
A financial review is an assessment of a company's financial statements and performance, often conducted to identify discrepancies or areas for improvement.
Hedge funds are investment funds that employ various strategies to maximize returns, often using leverage and derivatives to achieve their goals.
Market reaction refers to how investors respond to news or events that affect a company's stock price, often leading to volatility in the market.
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