The investors betting on British stock market pain for Halifax Bank of Scotland came out of the shadows today as the lender's £4bn (€5bn) cash-call came under more pressure.
Under new rules from the Financial Services Authority (FSA) watchdog in the UK to tackle potential market abuse, hedge funds and other investors must from today tell markets when "shorting" firms raising funds through rights issues.
Short-selling, or "shorting", is when someone borrows stock in a company and sells it in the hope of buying it back at a lower price to return to the original owner - pocketing the difference as profit.
Under the disclosure rules, US-based investment firm Harbert Management Corporation revealed it had shorted 3.3% of HBOS shares - around £340m (€430.2m) - through its Harbinger hedge fund.
Meditor Capital Management - which acts on behalf of institutional investors such as pension funds - has also shorted a 0.3% stake in the bank.
The FSA has acted to prevent bigger investors possibly exploiting volatility in share prices around firms carrying out rights issues at the expense of smaller shareholders. Any short positions of 0.25% or more must be revealed.
However, today HBOS shares were more than 2% lower, trading around the 275p "discount" price of the new stock being offered to shareholders in the £4bn (€5bn) fund-raising move.
Last week the bank warned of another £1bn (€1.2bn) in write-downs on investments hit by the credit crunch and predicted a 9% fall in property prices this year.
Analysts at investment bank UBS also lowered their target price on the stock today, predicting that mortgage arrears will continue to rise into the second half of next year.
HBOS has also revealed a £4.2bn (€5.3bn) exposure to the embattled housebuilding sector, but UBS said it may have to write off 20% of this loan book over the next three years.
The bank has stressed that its fund-raising efforts are on track. However, if demand is low, the banks underwriting the rights issue could be left with substantial share holdings to shift with the potential for hefty losses.
HBOS investors are set to vote on the scheme on Thursday, with a July 11 deadline for shareholders to confirm their interest, assuming the right issue is approved.