15 Mar'18

Betting against global advertising companies

 

Bets from hedge funds against global advertising companies total more than $3 billion. The FT reported that some of the hedge funds include Marshall Wace and Lone Pine.

 

City AM specifically report that Lone Pine Capital have ‘mounted a bet against WPP’ worth almost £90m.

 

The motivate to short-sell against the advertising industry is to profit if/when the share values drop. The large sum demonstrates some investors have a lack of confidence, and the belief that the industry’s growth is at an end.

 

Further evidence of the markets lack of trust in advertising agencies includes:

– The Independent reported in June of last year that ‘more than a third of investors refused to back Sir Martin Sorrell’s (WPP CEO) pay deal’

– The World Federation of Advertiser found 65 per cent of respondents had improved their internal capabilities with actions such as hiring a Head of Programmatic so they can take back more control of their media spend.

– P&G’s Chief Brand officer March Prichard stated, ‘This is the year we take back control to transform the industry through mass disruption’, as reported by The Drum

– The FT referenced Markit data’s report hedge funds have taken out ‘short positions worth $2.2bn in the shares of Omnicom’ and ‘a $426 bet against the stock of Interpublic’.

 

Could the advertising industry be impacted in the same way the US sub prime mortgage market was?