George Soros scores big win in a short bet against Trainline

By: Ajay Pal Singh
Ajay Pal Singh
Ajay worked at Tata Motors in project planning before discovering his passion for stocks. Today, he lives in Canada and enjoys… read more.
on May 20, 2021
  • U.K. government announces plans to overhaul the railroad infrastructure in the country.
  • Shares of the digital ticker seller, Trainline, fell as much as 33% on Thursday.
  • George Soros' U.K. investment arm had a short position in Trainline.

SFM UK Management LLP, the U.K. arm of George Soros’ investment fund, held a short position in the stock of Trainline PLC (LON: TRN) equivalent to 0.7% of the company’s value as of the end of March 31.

Shares of the digital ticker seller, Trainline, fell as much as 33% on Thursday before taking a breather but are still down 23% after the U.K. government announced its plans to overhaul the railroad infrastructure in the country.

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Soros and some other short investors held short positions in the company betting that demand for public transport in the U.K. will not return to pre-pandemic levels but the government’s announcement took an unintentional aim at the business model of the company as the rest of this story explains.

Impact on Trainline

Trainline enjoys a dominant position in the domestic online travel booking market, with 70% of all digital fares sold by the company.

The U.K. government’s plans involve setting up a state owned body, Great British Railways (GBR), to simplify the rail network in the country. It will oversee the rail infrastructure, set timetables and prices as well as sell tickets while private players will still be contracted to run the trains. So, it will become a direct competitor for Trainline in the business of selling tickets.

“When your potential competitor is the state the threat can be almost existential, and the sweeping changes to the UK railway network which have been announced contain an important detail which is potentially devastating to Trainline’s business model.” said Russ Mould, investment director at British digital stockbroker AJ Bell.

Deadline for Trainline

The new plans are set to take effect in 2023 so the company has two years to figure out how it will fit within the new setup. 

While noting that sales volumes and revenue could be seriously impacted, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said the following regarding the news:

“Trainline’s current commission rates are guaranteed until April 2024 under an agreement with the Rail Delivery Group, but after that how the company will slot into the new rail world is far from clear, without further detail about how the new system will operate.″

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