Hedge Funds Circle Royal Mail

Nov 26 2013 | 12:38pm ET

The 60% return they've earned on shares of the U.K.'s Royal Mail since its initial public offering two months ago isn't enough for some activist hedge funds.

Hedge funds have been buying up shares of the British postal service in advance of its first results announcement as a public company tomorrow. Royal Mail is expected to report record half-year profits.

Some hedge funds think that the record could be set a bit higher, and are pushing the Royal Mail to be "far more aggressive" in its cost-cutting program, the Daily Telegraph reports.

"There's been interest from London-based hedge funds, particularly since [The Children's Investment Fund] disclosed its stake," a source told the newspaper. "American funds have started looking at the company later but they are becoming the main buyers."

"The productivity improvement rate is really pretty low, given the amount of new technology at the company," another source told the Telegraph.

TCI has taken a 5.8% stake in the Royal Mail and is its largest shareholder. The frenzied buying among hedge funds, and the stock's soaring price, have led to widespread anger about the low price shares fetched in their October IPO.


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