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Boost for Cupid as shares up by 53%

SHARES in internet dating company Cupid soared 53.1% as the hedge funds targeting it closed out the bulk of their positions and the Edinburgh-based business railed against "misrepresentation and ill-informed speculation" concerning its methods.

Filings published by the Financial Services Authority show that New York-based Tremblant Capital has completely closed out its short position while London's Ennismore Fund Management has a net short equivalent to 0.66% of the company's shares.

This compares to bets of 3.6% and 1.3% respectively last week.

In short selling, investors borrow stocks to sell them, intending to buy them back at a lower price and profit from the difference.

Cupid's shares closed up 26p at 75p, having traded as high as 110.26p during the day.

The stock failed to regain all the ground lost when its shares plunged 57% on Friday. But it is back over the 60p a share level at which the company came to the stock market in 2010.

Chief executive Bill Dobbie saw his personal stake rise in value by £3.8 million to £11m, having seen its paper worth fall by £9.5m on Friday.

Cupid's latest woes came after the Kyiv Post of Ukraine, where Cupid has large back-office activities, claimed that the AIM-listed firm employs "motivation managers" to entice visitors to its websites to become subscribers. There was also a flurry of other accusations on websites.

Cupid, owner of sites such as Benaughty.com and Uniformdating.com, stepped up its defence yesterday.

"Cupid strongly refutes all allegations that its business model or practices and procedures are in any way fundamentally flawed, inappropriate or illegal," the company said.

"The directors believe that there has been a great deal of misrepresentation and ill-informed speculation in the marketplace and the company is currently taking legal advice on these matters."

It added that an internal inquiry concluded "the company does not employ members of staff to create fake profiles, impersonate users or use any other dubious practice to encourage customers to take out subscriptions or in order to retain existing customers".

The firm's websites, such as Cupid.com and Flirt.com, allow people to register for free but a subscription is needed to reply to messages.

The BBC claimed last month Cupid users suspected fake messages had been used to encourage them to take out subscriptions. Cupid said members of the motivation team monitor its websites to detect technical issues and to moderate chat rooms and forums. They do not communicate with free members, it said.

Cupid denied it had a particular problem with scammers who seek personal information such as bank details.

"It should be emphasised that scamming exists across the entire online industry and is not something that is specific to Cupid," the company said.

It said telephone numbers used to cancel some subscriptions cost it money rather than generated profit.

Meanwhile, it said that "to eliminate any speculation on the subject of related party transactions" a payments company Interactive Dating & Entertainment, with which Mr Dobbie is involved, is to repay £2.2m due to Cupid within three months.

It told investors that currently revenues are more than 20% higher than in the same period of last year and the company has "a strong financial position".

Paul Morland, analyst at house broker Peel Hunt said: "It appears that recent bad publicity has not impacted trading."

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