Interserve surge squeezes shorts amid Emerald rescue reports

Interserve shares surged more than 40% on Thursday afternoon, exerting a deep squeeze on one of the most shorted stocks on the London Stock Exchange.

Emerald Investment Partners has been hoovering up the embattled outsourcer's debt, it was reported last weekend.

Pubs tycoon Alan McIntosh has bought up £140m of Interserve's debt via his Emerald family office, the Telegraph revealed on Saturday, with the Punch Taverns co-founder snapping up loans from banks looking to reduce their exposure to Interserve amid rising worries about the sector sparked by the collapse of Carillion.

Emerald said it saw Interserve as a “compelling business with a strong management team and clear strategy”.

Last month, the Cabinet Office, less than a month after denying that it had put Interserve on a watch list, was reported to have brought in accountants from Deloitte to help it to monitor the FTSE SmallCap company.

Interserve, which employs around 80,000 people worldwide in a business that spans construction, cleaning and other outsourced services, issued two profit warnings last autumn after new chief executive Debbie White was drafted in.

This year White said net debt should stand at roughly £513m at the end of its current financial year. Directors have been in talks with lenders as costs from the group's difficult exit from its energy-from-waste programme had ballooned.

Interserve was the 15th most shorted stock in the UK as of close on Wednesday.

A spokesman for the company said it was not expecting to put out any statement on Thursday, but traders in the City cited the Emerald reports and short sellers being squeezed out as reasons for the surging share price.