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George Soros betting against Trainline

The Hungarian-born businessman senses a permanent change in work patterns
April 26, 2021

One of the criticisms levelled against the practice of short-selling is that if a big enough beast has taken a position, it can almost become self-fulfilling. It is almost the opposite dynamic of when someone like, say, Warren Buffett takes a long position in a stock. This does not always hold true. Speculation can grind up against fundamentals, but it is always worth monitoring stocks on this basis.

Trainline (TRN), which is due to release its full-year figures on 6 May, has become one of the most heavily shorted stocks on the London market since the end of March. One of the largest short positions has been taken by SFM UK Management, an investment vehicle controlled by George Soros.

Soros and a handful of other short-sellers have established their positions in expectation that demand for public transport may not recover to pre-pandemic levels even when a degree of normality returns to the wider economy.

The inherent flexibility of Trainline’s business model has been on display through the pandemic, as the group has been able to tailor its marketing spend and other outgoings in line with activity levels. It has reduced its average monthly cash burn to around £5m, well below original analyst estimates. The liquidity position has also improved substantially following January’s £150m convertible bond issue.

Any permanent reduction in passenger numbers is hardly beneficial, but the group has stepped up investments in app technology that will support the UK roll-out of new Flexi Tickets, including improved self-serve functionality.

Many people who have been forced to work remotely during the crisis will probably appreciate why Soros has taken the position. While it is too early to judge the extent to which work patterns will be permanently altered, you might think twice before betting against the businessman given his track record.