More than a fifth off the value of Thomas Cook has been wiped off amid the fallout from a profit warning a week ago.
Shares in the travel group have more than halved since the warning – its second in two months – as concerns grow about the financial strength of the 177-year-old company, The Times reported.
Online travel agent On the Beach, which is also listed on the stock market, is now reportedly worth £180 million more than Thomas Cook, despite only launching in 2004.
Analysts at German broker Berenberg last week suggested that Thomas Cook was “uninvestable” without “at least £400 million of new equity”.
Thomas Cook shares closed down 6½p, or 21.5%, to a six-year low of 23½p valuing the company at around £400 million.
The company said that it expected profits for 2018 to be lower than expected owing to restructuring charges, flight disruption and disappointing demand over summer.
Hedge fund Marshall Wace has led short-selling of Thomas Cook, with a total position of 17.5 million shares, or 1.3% of the stock. The next biggest shorter is TT International, with 0.83%, according to The Times.
Short-selling involves an investor borrowing shares and immediately selling them, hoping they can buy them up later at a lower price, return them to the lender and pocket the difference.
According IHS Markit Securities Finance, an additional 20 million shares in the travel group – equating to a position of £5.3 million – were borrowed last Thursday and Friday, lifting the total borrowed to 30 million shares, about 2.5% of the company, the highest level since September 2017.
Thomas Cook suffered a £163 million loss in the year to September 30, down from a £9 million profit for the previous 12 months.
The lower earnings from heatwave-hit summer trading were mainly blamed on discounting in the lates market with the UK performance described as “particularly disappointing”.
Chief executive Peter Fankhauser said last week: “We will put particular attention on addressing the performance of our UK tour operator where the challenges of transformation in a competitive environment remain significant.”
He was reported by the Telegraph to have “sought to calm nerves” in private talks yesterday with institutions nursing heavy losses from the early profit warning.
Thomas Cook has told shareholders that despite its struggles this year as a result of Britain’s scorching summer, it has the financial strength to navigate the lean winter months.
The operator has told analysts that it does not face a shortage of liquidity as it did prior to a rights issue in 2012.
Credit Suisse said that cash flow could improve if Thomas Cook avoids some of the unscheduled problems that triggered its latest profit warning. As well as a domestic heatwave, it suffered higher flight disruption costs.
Laith Khalaf, of trading firm Hargreaves Lansdown, told the Daily Mail: “It’s clearly been a pretty horrible year for Thomas Cook investors. If you’ve got a business that has a fair amount of debt on the balance sheet, a trading slowdown can be particularly punitive.
“The Christmas trading season is going to be important.”