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(Bloomberg) -- It was US President Donald Trump’s furious Oval Office clash with his Ukrainian counterpart last Friday that convinced fund manager Hugo Squire it was time to buy bonds in Eutelsat Communications SA.
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The French satellite operator’s debt was trading at near-distressed levels, with some money managers citing it as a popular short bet for hedge funds and trading desks. This week though, the unfolding signs of a geopolitical shift, and Europe’s race for an alternative to Elon Musk’s Starlink are driving a stunning reversal, lifting shares by about 400% and pushing its bonds well above face value.
“With this credit something has fundamentally changed,” Squire, a portfolio manager at Schroders Plc, said in an interview. “Europe will have to stand on its own two feet in all areas defense-related and that will be beneficial to Eutelsat.”
A spokesperson for Eutelsat declined to comment.
Squire’s trade, initiated Monday morning, has paid off. Eutelsat’s April 2029 bond has rallied more than 12 cents this week, and all its other issues are also up sharply.
“It’s almost like a GameStop experience,” he added, referring to the 2021 saga of the video-game firm whose overnight transformation into a retail-trader favorite left hedge funds licking their wounds.
Eutelsat’s outsized rally isn’t exactly down to the retail-buying rush that characterized Gamestop Corp.— fund managers such as Squire have also jumped in. But the build-up in bearish positions has certainly been a factor, with its bonds heavily targeted by short sellers in recent months, according to people familiar with the matter.
Its stock was also shorted, with some 13% of its free float out on loan as of Feb. 28 — the day of Trump’s televised exchange with Volodymyr Zelenskiy — according to data from S&P Global Market Intelligence.
For all those short sellers, the turnaround has been brutal — the stock surge alone has cost traders approximately $237 million in mark-to-market losses, financial analytics firm S3 Partners estimates.
The short bets were motivated by worries that Eutelsat would face stiffer competition from Starlink, especially as Musk gained influence after the election of Donald Trump. That narrative has reversed rapidly, with the French firm now considered a key player in Europe’s efforts to support Ukraine and to ramp up its own defenses.