LHC Capital, a Sydney-based funds management firm known for its bold investment strategies, has taken a significant short position against HMC Capital, led by prominent dealmaker David Di Pilla. In its September update, co-chief investment officers Stephen Aboud and Marcus Hughes revealed that their high-conviction fund achieved a return of 4.4 percent in the last quarter, largely attributed to this strategic move against HMC Capital.
The five-page investor letter primarily emphasized the fund’s successful long positions, which include investments in HUB24, a financial services platform, the family tracking device company Life360, and investment house MA Financial. Notably, LHC Capital did not respond to inquiries from Street Talk regarding their latest activities.
HMC Capital, which manages assets totaling $18.7 billion across real estate, private credit, and digital infrastructure, has faced rising short interest that surged from approximately 1 percent of shares held short in early July to 5 percent recently. This increase coincided with a decline in the company’s stock price, which dropped from nearly $10 at the beginning of the year to $3.40 as of last Friday. Investors express concerns about HMC Capital’s ability to raise capital and sustain growth, critical factors for the firm’s future.
HMC Capital has been involved in significant transactions, including its advisory role in the $8.8 billion reverse takeover that brought Chemist Warehouse public. The company has ties to billionaire Mario Verrocchi, co-founder of Chemist Warehouse, enhancing its profile in the investment community.
Short sellers are also focusing on HMC Capital’s DigiCo Infrastructure REIT, which has struggled since its $2 billion initial public offering. The performance of this REIT has added to the growing skepticism surrounding HMC Capital’s prospects.
Concerns in the Defence Sector
In addition to its activities targeting HMC Capital, LHC Capital has expressed apprehension about the Australian Securities Exchange (ASX) listed defence sector. The firm noted that some defence companies have experienced substantial price increases despite reporting negative free cash flow and having limited intellectual property.
Aboud and Hughes emphasized that their fund currently holds no long positions in this sector but remains vigilant for potential shorting opportunities. Their cautious stance reflects broader concerns about valuation sustainability in a market that may be overvalued.
As LHC Capital navigates these complex market conditions, its strategic decisions highlight the challenges and opportunities within the Australian investment landscape. Investors will be closely monitoring the evolving situation with HMC Capital and the defence sector in the upcoming months.
