Housebuilder hits a wall: How did Vistry become the UK’s most shorted stock?
Vistry, the “nation’s favourite housebuilder,” has become the UK’s most shorted stock. From a shift to a bold new model to hopes that it can fuel Burnham’s housing vision, Felix Armstrong unpicks the firm’s recent history
Back in 2024, Vistry boss Greg Fitzgerald was brimming with optimism. The housebuilder’s ambitious switch from a private market to a partnerships model would allow it to build anywhere between 30,000 and 40,000 houses every year, he told investors.
Vistry, which had only existed for half a decade, had switched two years earlier to focus on building houses in partnership with institutional landlords and councils, rather than for sale on the private market.
The gear shift initially made Vistry the darling of the sector, but a poorly received trading update earlier this month shone the spotlight on a housebuilder that has hit a wall.
Fitzgerald, the charismatic architect of the housebuilder’s pivot, announced his shock retirement earlier this year. Its finance chief has named his departure date, after being poached by a private firm.
Vistry saw its shares slump 12 per cent in one day after it revealed a £30m first-half loss. The firm’s internal issues are only the half of it: the housebuilding sector has faced soaring building costs and fragile demand since the Iran war kicked off in February.
Earlier this month, Vistry became the UK’s most shorted company, with a more than 17 per cent short interest. Having started discounting homes to shift inventory, the firm was quickly pounced on as the most vulnerable member of an industry facing a mountain to climb.
With profit slipping, short-sellers prowling and a new chief executive who has only just got his feet under the table, the “nation’s favourite housebuilder” has been left with a lot to prove.
Vistry looks to the US for new life
Vistry was only established in January 2020 but its origins lie in Bovis Homes, a housebuilder which began buying up land in the 1950s before being snapped up by P&O in 1974 and subsequently demerged before the turn of the century.
In May 2019, Bovis opened takeover talks with rival housebuilder Galliford Try. A £1.1bn deal was agreed in November and signed off in January the following year. Fitzgerald, who had previously led Bovis and was Galliford Try’s chief executive at the time, hailed the creation of a new “top five housebuilder”.
Vistry endured a difficult first few years, triggering around 100 redundancies in the initial merger before furloughing the majority of its staff during the covid-19 pandemic.
Emerging from the lockdown, the housebuilder turned to the partnership model in a bid to set itself apart from competitors like Barratt Redrow and Taylor Wimpey.
Influential US shareholders including David Capital Partners urged Fitzgerald to look at NVR for inspiration – an American housebuilder which had been spurred to success using a partnership model, delivering 28 per cent average share price growth each year.
In September 2022, the housebuilder snapped up competitor Countryside Partnerships for £1.2bn to kick off its shift to the partnerships model. Through this system, Vistry sells at least 50 per cent of homes to a partner before upping tools on a new development, and later offloads the remaining homes to private buyers on the open market.
The switch showed initial promise. Announcing its 2023 results, Vistry declared itself “the country’s leading Partnerships business” and posted a 35 per cent uplift in housing completions, to 16,118.
By pre-selling at least half of its homes to institutional partners, Fitzgerald said, the housebuilder benefits from “visibility of future revenue [which] enables us to deliver new homes at greater scale and pace”.
This optimism came crashing down in October 2024 when Vistry issued a profit warning after admitting that the building costs on some of its developments in southern England had been understated.
The error, which resulted in a £165m hit across three years, caused a major reevaluation of the housebuilder, wiping more than £1bn from its value.
Some industry figures said the housebuilder’s partnerships model was to blame, because its fixed-price contracts with partners prevented it from hiking prices to offset higher costs.
One institutional shareholder in Vistry suggested that the housebuilder was too eager to rush into this new model. “The main two issues were the affordable housing market that slowed down and the private market side that wasn’t working properly.”
Vistry ended up “trying to build quickly within a market that didn’t have that kind of demand,” leaving houses unsold,” they told City PM.
Anthony Codling, an analyst at RBC Capital Markets, told City PM that Vistry “saw a huge opportunity because there was a big shortage of social and affordable housing. We were still kind of reeling from the mini budget cost of living, and so demand was falling for open market homes.”
But Vistry tried to do too much, too quickly. “It’s a huge pivot. It’s simply inverting the business model,” he said.
Pitching for role under Burnham
Earlier this month, Vistry paired its announcement of the departure of finance chief Tim Lawlor with an unscheduled trading update, in which it forecast a £30m first-half loss.
Profit had taken a hit from a “hiatus” between partner deals and the discounts it slapped on houses in a bid to shift stock, the housebuilder said. The firm has prioritised cash generation in a bid to shore up its balance sheet, aiming to return to £100m net cash next year.
The update was the first outing for new chief executive Adam Daniels, a former regional manager who was promoted to succeed Fitzgerald when he stood down in March.
One of Daniels’s first tasks as Vistry boss was to squash rumours that the housebuilder was considering an equity raise. Dan Coatsworth, head of markets at AJ Bell, said: “Vistry has been discounting its homes just to shift inventory, hence why profits are expected to be worse than previously expected.
“Margins have been squeezed and there has been speculation it might need to do a rights issue.”
This speculation was quickly snuffed out amid warnings from analysts that a fundraise could prove a further weight on the housebuilder’s share price.
There are reasons to be hopeful for Vistry, namely in the shape of new Prime Minister Andy Burnham and returning housing secretary Angela Rayner.
During the Makerfield by-election campaign, Burnham pledged to oversee the “biggest council house building programme since the post-war period”.
This could be a huge opportunity for Vistry, Daniels said, because it “has a long and established track record of working in partnership with local authorities of all political colours across England to deliver new homes”.
“This is a partnership model which Vistry is proud to have developed and refined and is one which is ideally placed to assist local authorities in delivering new council homes across a range of affordable tenures,” he added.
Amid suggestions that the government should nationalise Vistry to enact its council housing programme – an unlikely scenario – the firm’s management will hope to prove that it can deliver these homes just fine on its own.
Vistry was contacted for comment.