BNB - Babcock & Brown

[numbercruncher]

Re: TOO MUCH DEBT FOR A TAKEOVER

You cant blame the shorters as i said 3 months ago this mob will be next cab off the rank,as for t/o?whats to takeover...100% firesale must happen,you were clever only losing 25%,just amazes me why anyone would buy this junk.

the business model of rolling assets up that you dont own,borrow massively,take commissions,fees doesnt work never will...its abc again,or as yogi bera says"its de ja vu all over again!"...tb

downgrade already sitting in the anns.inbox before open

next cab off the rank...asciano

Yup this Business model is in its dying days, was like some sort of sick joke really, pack of locusts.

 

[Fed23]

Could it possibly have found a bottom hover around the $5 mark after hitting $4.70.

I dont hold, but for other holders I hope it holds around this level. I don't believe any of its backer would let it go under, it's just too big

 

[cordelia]

Can someone explain to me...

Why would someone lend shares to another for them to sell into the market, batter the price down and then return them back at far lower price???

Who ever lends shares to a short sell will be getting screwed???

Anyone really understand the mechanics of short selling??

benwex

well I am not 100% sure on this but basically those who hold the shares (a custodian) get paid for lending them...funds of some sort or brokers...I wouldn't think the people who actually own the shares lend them to be sold down...... Yes only a true idiot would lend his shares to be sold down...That's what I find disturbing....

If you buy shares you don't take possession of them so to speak....so where are they? and who's doing what with them...Someone set me straight if I am wrong....Personally I would be p###ed off if my shares were lent to be sold down...But after reading below I guess it really pays to read the fine print of your brokerage agreement..still that doesn't help if other brokers lend shares but yours doesn't...

The share goes into a free fall as those who do actually own them try to get out too. I am not sure on this but it has occured to me that if the borrowed shares are sold then what if whoever really owns them also wants to sell them at the same time....Wouldn't it be possible that shares that didn't actually exist could be sold? It's a buit difficult to get your head around really..well for me it is

i found this on the net on a forum :

http://answers.yahoo.com/question/index?qid=20071105143048AAGvOZT

I mean that a brokerage house needs to borrow shares from another investor to give to this investor so he can short the stock. But does the orginal investor have to consent to having his shares taken away?


Technically yes, but since most shares are held in brokers' accounts, the consent is automatic, according to the agreement between broker and client. the client does not know the shares are borrowed, and the broker is effectively lending his own shares.

 

[Tweaksta]

It's interesting to note that MQG is down nearly 4% as a side-effect of BNB's hammering.....but yeah 4.70 appears to be the lowest point for BNB today. They are now hovering at 5.34.

I tend to be of the thinking that if there are so many institutions who will not allow BNB to go down the gurgler then Macquarie should also be fine in the long run.

 

[just a thought]

Can someone explain to me...

Why would someone lend shares to another for them to sell into the market, batter the price down and then return them back at far lower price???

Who ever lends shares to a short sell will be getting screwed???

Anyone really understand the mechanics of short selling??

benwex

I am thinking along the same lines. It escapes me. The quantities of shares being borrowed is huge therefore they must belong to some institutions , such as super fund managers. Why would any fund manager lend the shares to drive the entity down to a point of business destruction, like in the case of Centro or ABC Learning? The fund may receive back the lending fee but if the value of the shares returned have no hope of recovering then the fund would be at big loss. If our superfund managers are wiping out the value of our super investments - then the thought is pretty scary and APRA better get a move on on regulating this activity!
Does any one have any explanation to what has been happening? Am i missing the point somewhere?

 

[cordelia]

I am thinking along the same lines. It escapes me. The quantities of shares being borrowed is huge therefore they must belong to some institutions , such as super fund managers. Why would any fund manager lend the shares to drive the entity down to a point of business destruction, like in the case of Centro or ABC Learning? The fund may receive back the lending fee but if the value of the shares returned have no hope of recovering then the fund would be at big loss. If our superfund managers are wiping out the value of our super investments - then the thought is pretty scary and APRA better get a move on on regulating this activity!
Does any one have any explanation to what has been happening? Am i missing the point somewhere?

I don't fully understand it but it will be interesting to see if somewhere down the track someone doesn't attempt to take legal action against the practice. I don't know the legalities of shorting so can't really speculate...

 

[ithatheekret]

It's interesting to note that MQG is down nearly 4% as a side-effect of BNB's hammering.....but yeah 4.70 appears to be the lowest point for BNB today. They are now hovering at 5.34.

I tend to be of the thinking that if there are so many institutions who will not allow BNB to go down the gurgler then Macquarie should also be fine in the long run.

I was thinking predatory effects for a comeback at some stage , but I'd say we are sure that the model will now force writedowns of substantial and diluting effect .

Hence the run for the exits , but this has been on the wind for months .......

 

[rub92me]

I am thinking along the same lines. It escapes me. The quantities of shares being borrowed is huge therefore they must belong to some institutions , such as super fund managers. Why would any fund manager lend the shares to drive the entity down to a point of business destruction, like in the case of Centro or ABC Learning? The fund may receive back the lending fee but if the value of the shares returned have no hope of recovering then the fund would be at big loss. If our superfund managers are wiping out the value of our super investments - then the thought is pretty scary and APRA better get a move on on regulating this activity!
Does any one have any explanation to what has been happening? Am i missing the point somewhere?

Maybe better to have a separate thread on this. APRA is not the regulator. The ASX sets the rules and ASIC is the regulator.
See https://www.asx.com.au/investor/education/basics/short_sales.htm

 

[just a thought]

Can someone explain to me...

Why would someone lend shares to another for them to sell into the market, batter the price down and then return them back at far lower price???

Who ever lends shares to a short sell will be getting screwed???

Anyone really understand the mechanics of short selling??

benwex

I was just explained that there are two actions in a short sell, one is to purchase a put option with a much lower price then the current share price (this sort of works as an insurance against a drop in a price) and second is to lend your shares for a fee to short sell. Thus when the price drops you would sell the put option and recover the loss in share value and also collect the lending fee. That to me clarifies why would some one lend the shares as the lender's share value does not diminish if put option is purchased to cover the loss. But the put option has to be close to the rock bottom price otherwise the lender still falls short. Which brings me to the point that the lenders and short sellers must be in collaboration in order for the lender to come out in the black.

 

[tigerboi]

Re:GETTING BASHED UP REAL GOOD...

I said yesterday it would close around $5.50 & that seems about right so far,gonna be some furious attempts at holding back this pounding but monday will see this in a halt for sure...then the fire sale of the assets it dont own & owes lots for...tb

 

[MRC & Co]

Anybody who goes short, has to buy back, so what is the difference?

Only people being scared out are the weak hands and 'mum and dad' investors.

Once some of these "big bad Hedge Funds" start covering their shorts, there could well be a squeeze which will then get all those weak hands back in at higher prices.

The share price will then slowly drift down.

Who wins?

Think about it.

 

[ROE]

Anybody who goes short, has to buy back, so what is the difference?

Only people being scared out are the weak hands and 'mum and dad' investors.

Once some of these "big bad Hedge Funds" start covering their shorts, there could well be a squeeze which will then get all those weak hands back in at higher prices.

The share price will then slowly drift down.

Who wins?

Think about it.

Short seller wins, business with flaw model lose
Has any of these stock ever restore to the good day before the stampe?
ABS, Alco, Centro ?

 

[barnz2k]

This is just crazy.

I was thinking about shorting last night and trying to work out in my head too where exactly those shares come from to sell.. Its like an IOU or something.

like bill borrowing fred's car and selling it to bob at a high price, bob crashes it, so bill buys it back for a lot less, then he gives it back to fred - in much worse condition than when he lent it to him but bill is the one better off??

 

[Mr_T]

Anybody who goes short, has to buy back, so what is the difference?

Only people being scared out are the weak hands and 'mum and dad' investors.

Once some of these "big bad Hedge Funds" start covering their shorts, there could well be a squeeze which will then get all those weak hands back in at higher prices.

The share price will then slowly drift down.

Who wins?

Think about it.

Short sellers are very important. They

a) Give the business an appropriate scapegoat. Instead of Uncle Phil admitting that him and his team have done badly, he can try to blame the short selling hedge funds. The sad thing is people actually buy that excuse.

b) Gives investors some hope, notwithstanding it is false. If it's all the hedge funds' fault, then the problem isn't with the business or the shareholders for buying that business - it's the hedge funds!! And when they finish, the company will recover - right???


Reality isn't always pretty, but it's always there. The business model is bad, it is run in an opaque manner, there has been misrepresentations to the shareholders, management put themselves first with the bonuses, massive mistakes have been made. That is reality.

 

[barnz2k]

Citi group has down graded BNB risk rating from high to speculative and lowered their price target.

Downgrades happening arent good for BNB right now - but note that they still until recently had a price target of $25. So they had some confidence in BNB too??

from here

Citigroup downgraded its risk rating on Babock to speculative from high. A hairy-chested punt in other words. The comments on credibility were telling.

"We have moved from an ongoing business valuation of $25 to a price target of $6.80 based on 0.9x NTA until this issue is clarified. Our rating is now 'neutral'.

 

[tcoates]

Who wins?

Think about it.

I figured that was a rhetorical question.

But something has to be amiss when the brokers suddenly change their outlook on the company and slash valuations (target prices) in half. There are still (?) buy recommendations on this train wreck.

* the company does not know who, but is blaming short sellers.

* one could argue a certain lack of transparency if the bosses say everything is rosy, when this cannot be the case based on the share price.

* on top of that, BNB decide to take on extra debt in UK with Angel trains.

It is unfortunate that it will the mum and dad investors that will be caught in the middle. But I suppose that is life these days.

BTW - I am not for or against short selling in whatever form. But something went amiss with this stock.

Tim

 

[Eddyl]

Does anyone know how the BNB satellite funds are structured? Is the parent company allowed to sell off assets in the satellite funds if the parent company goes bankrupt, but the smaller fund is actually operating well with good assets and little debt?

 

[Mr_T]

Stephen Mayne sums it up again as only he can:

Time for Babcock & Brown to sack Phil Green
Stephen Mayne writes:

Babcock & Brown boss Phil Green has just replaced Eddie Groves as “Australia’s most sackable CEO”, although with ABC Learning shares falling to a new record low of just 93c this morning, both should be fired forthwith.

IAG CEO Michael Hawker walked the plank last month after admitting: “I have lost the confidence of a number of our shareholders, which is not tenable for the company."

The Babcock fiasco is 10 times worse than IAG given the whole empire has crashed even further in morning trade.

Unfortunately, Babcock still retains all the hallmarks of a private partnership with staff ownership exceeding 40% and four executives sitting on the board. It is hard to believe so-called lead independent director Elizabeth Nosworthy has the stomach to sack Green based on this argument at the recent AGM.

The five independents – Nosworthy, ASX director Michael Sharpe, former BT funds management heavy Ian Martin, German banker and Bayern Munich director Dieter Rampl, and Credit Suisse chairman emeritus Joe Raby need to step in and take control of the situation.

As Merrill Lynch noted in a report today before the latest sharemarket savaging, losing control to the banks was “a further hit to management’s already fragile credibility":

It was interesting that Trevor Loewensohn was the Babcock man quoted in the press today because he is the most senior executive who wasn’t part of the private Babcock partnership, having built his strong reputation at Schroeders, JP Morgan and UBS over the years. Loewensohn for CEO anyone?

Green also looks personally vulnerable because he is one of the few Babcock executives who didn’t sell down his stake since the 2004 float. And you have to worry about the debts accumulated buying up the following stakes in the various troubled satellites.

B&B Infrastructure: 17.78 million shares
B&B Power: 7.08 million shares
B&B Wind: 4.24 million shares
B&B Residential Land: 4 million shares
B&B Communities: 4 million shares
Green is down more than $30 million from these plays and his 12.77 million shares in the head stock are today only worth $64 million.

We’ve put together this video from the recent AGM webcast so you can see Green’s body language as he discussed shareholder equity, margin loans and his own decision not to participate in the recent dividend reinvestment plan.

Babcock’s house banker UBS has today dramatically changed its tune on the financial engineers, slashing its share price target from $25 to just $6.80.

However, UBS is talking up the prospect of a management buyout, all of which depends on the financial strength of the top 13 Babcock executives who together still owned 41% of the company after the 2004 float and have realised more than $500 million from subsequent sell-downs.

With talk of a management buyout and executives under personal financial stress, the independent directors must take immediate control of the situation.

The first step is firing Green and the second is replacing San Francisco-based founder Jim Babcock with an independent chairman.

You just can't assemble more than $50 billion in debt and destroy more than $4 billion of investor funds and expect to stick around.

 

[tcoates]

Mr T,

You should have included the link to the video...

http://video.maynereport.com/Video.aspx?id=18567


Also worth a read...

http://www.sharecafe.com.au/article_air.asp?a=AV&ai=9007

Tim

 

[rub92me]

Instead of all this going on about the 'evil' short-sellers, how about just checking the facts? It's made publically available by the ASX, albeit it delayed by a day. Short selling on BNB is relatively small compared to say MQG or TLS. See link --> http://www.asx.com.au/data/Shortsell.txt