* Hedge fund short sellers gain as much as $187 mln
* Odey AM, D.E. Shaw, Marshall Wace among big short sellers
* GM offloads Peugeot stake, loses $82 mln
PARIS/LONDON, Dec 13 (Reuters) - Hedge funds have reaped some $190 million this week from betting against Peugeot , in contrast with GM, whose own investment in the French carmaker proved to be a loser.
The "short" bets against PSA Peugeot Citroen - when investors such as hedge funds sell borrowed shares in the hope of being able to buy them back more cheaply later - proved a winner as the stock fell by around 20 percent this week.
The shares were hit by a big writedown and plans for a capital increase, as well as by General Motors' decision to sell its 7 percent stake in Peugeot on Friday for 10 euros a share, or about 248 million euros ($341 million).
GM initially bought the stake in early 2012 for $423 million, meaning it sold at a loss of about $82 million, less than two years after buying it.
In contrast, short sellers have made potential gains of up to 136 million euros ($187 million) since Monday, according to Thomson Reuters calculations, based on the number of Peugeot shares out on loan - a gauge of short selling against a firm.
The actual outcome for short sellers will depend on when they took out their positions, and as Peugeot shares are still up around 80 percent this year, the stock's losses this week may just be limiting the damage for some of them.
"A lot of hedge funds have been expecting a capital increase, so borrowing of the shares has been brisk," said David Noble, risk arbitrage trader at Louis Capital Markets, referring to expectations that loss-making Peugeot will undertake a cut-price share sale to bolster its finances.
"The GM stake sale is a bonus," he added.
Noble cautioned, however, that fresh bets against the stock were fraught with risk, given Peugeot's plans to strengthen its alliance with China's Dongfeng.
"I think it's now a dangerous game to short Peugeot, as a strong China deal could be a game changer," warned Noble.
Clairinvest fund manager Ion-Marc Valahu agreed, saying Dongfeng could prove a better match for Peugeot than GM.
FAVOURED HEDGE FUND TARGET
Peugeot has been one of the most shorted stocks across Europe. Some 13.4 percent of its shares are out on loan, according to data from Markit, compared with an average of around 3 percent for the French stock market.
Odey Asset Management LLP and D.E. Shaw feature among the hedge funds with the biggest short positions on Peugeot, at 2.6 percent and 1.5 percent respectively, according to recent filings with French regulator AMF.
London-based Odey Asset Management - which increased its short position on Peugeot in the past few months, up from 1.6 percent in August - has made a theoretical gain of 24 million euros, or $32.5 million, since Monday.
Marshall Wace LLP and Adage Capital Markets also have significant short positions on the carmaker, according to filings. A Marshall Wace spokesman said the hedge fund did not comment on individual stock positions.
Adage Capital, D.E. Shaw and Odey were not immediately available for comment when contacted by Reuters.
Several traders said now might be a good time to cash in on any profits from short positions in case Peugeot's shares suddenly bounced back.
"It's not a slam-dunk short-selling target at current levels, due to the fact that the French government cannot allow the company to go down," said Phoebus Theologites, chief investment officer at SteppenWolf Capital.
(Editing by Mark Potter)