FMG - Fortescue Ltd

[oldblue]

a please explain notice should hit the ASX

we need some disclosure imo... cause there is no reason but the shorters for it to go down?

Better ask about RIO too, then. It's down almost 6%!

Resources all getting thrashed, not just Fortescue.

 

[prawn_86]

cause there is no reason but the shorters for it to go down?

I think its funny that ever since short selling became public knowledge EVERY stock that is falling has holders blaming short sellers.

What did people use to blame before the days of short sellers? Normal sellers? Could it still just be them...?

 

[gav]

well it hit $7.19 just before

todays buy brings my average down to $8.62. i thought it had start to steady the last few weeks, which is why i got some more today. buying pressure has kept it above $7. but after today, who knows...

 

[gav]

I think its funny that ever since short selling became public knowledge EVERY stock that is falling has holders blaming short sellers.

What did people use to blame before the days of short sellers? Normal sellers? Could it still just be them...?

Have you not read any of the posts that were made yesterday or today?

And can you please explain why all your posts are so negative towards FMG?

 

[agro]

Have you not read any of the posts that were made yesterday or today?

And can you please explain why all your posts are so negative towards FMG?

be nice to prawn_86 he is only stating his own personal opinion to which he is entitled to

i don't think the chap understands that 10% is being shorted which is equivalent to 238m shares

 

[prawn_86]

My posts may appear 'negative' as a believe it to be overvalued, which i have stated in my previous posts.

I just find it funny how if a stock is falling (not just FMG) that the holders blame short sellers. If 10% is available to short sell, then that means that 90% isnt available...

 

[simontitan]

Hmm the Plot thickens. I got out at the $7.85 mark the other day, then this

Fortescue mystery

John Durie | September 03, 2008 The Australian

SOMETHING doesn't wash with Fortescue Metal's claims that 10 per cent of its stock, or 280 million shares, had been "the subject of stock loans".

Certainly, the market has come to its own conclusion, and the 4 per cent spike in FMG’s stock price after the announcement yesterday was more than wiped out by a 5.9 per cent fall today, to $7.48 a share.

FMG boss Andrew Forrest has been banging the drum about heinous short-sellers destroying his company, as its stock price has fallen steadily from $13.15 a share in June.

Phil Green at Babcock & Brown played the same tune as his empire unravelled and, ultimately, the facts revealed that there was something fundamentally amiss with the company.

FMG has 2.8 billion shares on issue. so 10 per cent would be 280 million shares, but Data Explorers, which tracks stock loans around the world, said that as of August 31, just 28 million FMG shares were on loan and 170 million were available to be lent.

Now Data Explorer could have missed some loans, but 250 million shares is a pretty big miss.

Maybe someone served a notice on Phillip Falcone’s custodian, Bank of New York, and found that 280 million shares were available to be lent, but this is a long way from saying the stocks were actually lent.

Attempts to contact people at FMG to clarify the situation have proved unsuccessful, but surely they wouldn’t have put out the statement just to shore up the stock price.

At the very least, the saga highlights the urgent need to change the law to make stock loans transparent.

Stock-loan figures are as good a proxy as anything for short sales and the Government is meaning to changing the laws to require brokers to ask clients whether they are short selling.

If the answer is ‘yes’, a box is ticked and the market is informed.

The same system works for stock loans when they move from the custodian to the prime broker and to the client.

Unless the stock market is in free fall, politicians don’t seem to get energised about market reform and regulators can go to back to sleep.

But FMG has now provided a real live example of how lack of transparency can be used to manipulate prices.

Maybe someone should let Eric Mayne at the ASX and Senator Nick Sherry into the secret.

 

[SenTineL]

this is why i reckong day trading is a mug's game, very few people are succesful at it. you cannot predict the future in such a short space of time. it's just gambling IMO.

all i know is that i'm getting sick of the state of the market after such a great run of the last few years. it was going to happen sooner or later and serves as great learning tool.

good luck to all

 

[diliff]

My posts may appear 'negative' as a believe it to be overvalued, which i have stated in my previous posts.

I just find it funny how if a stock is falling (not just FMG) that the holders blame short sellers. If 10% is available to short sell, then that means that 90% isnt available...

And surely those 10% are shorting because they too believe the value of the share is going to decrease, whether it be in the short term or the long term. Otherwise they wouldn't short at all, as they'd lose money!

Maybe its undervalued, or maybe not, but whats the difference between that and a share being overvalued? Either way, the price is pushed in a particular direction by those who believe one way or the other...

 

[gav]

My posts may appear 'negative' as a believe it to be overvalued, which i have stated in my previous posts.

I just find it funny how if a stock is falling (not just FMG) that the holders blame short sellers. If 10% is available to short sell, then that means that 90% isnt available...

That 10% is only WHAT THEY KNOW is being shorted. What about other companies doing the same thing? What about your average joe who shorts them too? 10% is just the MINIMUM. Also, if you think its 'overvalued', what price do you think is 'fair value' in your opinion?

 

[njc.corp]

as i see it wether its getting shorted or not its still a game that we choose to play-

i mean does that mean all the other stocks that i traded and had a loss is due to people shorting it?

come on-

as a holder i aint happy but its my choice to be in it-

what i been doing lately is moving in and out- as i have seen and most of u guys would agree that lately most stocks can't sustain a price increase the day after-

my 2 cents but could some explain to me the last couple of months not only on fmg but nearly everything-are they get shorted too?

come on guys-

lets play or move on or u can sit and collect more on the low-

I could be wrong and just be talking rubbish-

Thanks

Nick--

 

[njc.corp]

That 10% is only WHAT THEY KNOW is being shorted. What about other companies doing the same thing? What about your average joe who shorts them too? 10% is just the MINIMUM. Also, if you think its 'overvalued', what price do you think is 'fair value' in your opinion?

gav-no personal attack on u-wether its 10 or 90 % that is getting shorted what diff does it make-

are people upset that they did not short it or knew what was going on-

i do see 2 sides to this

buy vs short ?

Thanks

Nick--

 

[nomore4s]

as i see it wether its getting shorted or not its still a game that we choose to play-

i mean does that mean all the other stocks that i traded and had a loss is due to people shorting it?

come on-

as a holder i aint happy but its my choice to be in it-

what i been doing lately is moving in and out- as i have seen and most of u guys would agree that lately most stocks can't sustain a price increase the day after-

my 2 cents but could some explain to me the last couple of months not only on fmg but nearly everything-are they get shorted too?

come on guys-

lets play or move on or u can sit and collect more on the low-

I could be wrong and just be talking rubbish-

Thanks

Nick--

If there are a lot of people short this stock, they must buy those shares back at some stage, so we could see a huge short squeeze.

 

[MichaelD]

Stopped by this thread to see what's currently happening with one of my more recent multi-R winners.

Has anyone considered this;

1. The price goes up because it goes up.
2. The price goes down because it goes down.

The logic here in this thread would seem to be;

1. The price goes up and I make money because I am a clever stockpicker.
2. The price goes down and I lose money because of "them". (them = hedge funds, short sellers, corrupt directors, ASIC incompetence, insert villian de jour here)

Pick a stock, any stock, going south and read the thread - the story is always the same. (But don't forget the knife catcher's credo - it's only a loss if you sell).

 

[prawn_86]

I would add:

1. The price goes up because it goes up. Because of buyers
2. The price goes down because it goes down. Because of sellers

Its a pretty simple equation really. And yeh, virtually any thread is the same these days, people blaming others/looking for reasons why the stock is falling.

 

[Hendrik]

Hi fellas im going to use my novice TA skills to try and make sense (if any) of the current FMG SP.



p.s read my sig.

 

[IFocus]

I think its funny that ever since short selling became public knowledge EVERY stock that is falling has holders blaming short sellers.

What did people use to blame before the days of short sellers? Normal sellers? Could it still just be them...?

Prawn it used to be day traders that were blamed for every thing including plagues and pestilence.

Many current market participants still haven't got their heads around that this is a bear market and prices will fall generally across the board no matter what CEO's and boards say about their company prospects.

Stock prices are currently being set based on risk and reality, you would have to have been living under a rock not have some understanding of current global financial issues.

Whether anyone believes that there are further shocks to come or not is not the problem its the risk that they may and the risks are real not just the usual set of doomsayers calling for the end.

As for short sellers well they only can because the market is falling.

 

[simontitan]

Two news articles today of interest. Just dipped below $7 mark.


Falcone in a flap over Fortescue Metals
MARTIN COLLINS: John Durie | September 04, 2008

IF Andrew Forrest is right and two-thirds of Philip Falcone's shares are on loan, then Falcone must by definition be in breach of the law by not lodging substantial shareholder notices.

Whether the breach is intentional or not, either FMG's figures are wrong or Falcone is in breach.

The transparency around stock loans and short selling may be abysmal but one thing is clear: if you are a substantial shareholder and more than 1 per cent of your stock is lent then you must lodge a change in substantial shareholder notice.

The ASX looked at the FMG disclosure and was happy with it for two reasons: it is relying on the fact that Fortescue is aware of its obligations, and covered shorts are not reported in Australia.

In other words the ASX is presuming the innocence of Fortescue and lacks the physical evidence to question Fortescue's statement.

In short it is a disgrace.

The ASX disclosure policies, or more to the point, the lack of them, been beautifully exposed not by some heinous hedge fund but by the richest man in the land.

Forrest has had share register sleuths Orient Capital look at his register and they have uncovered that more 280 million shares were on loan.

Orient did its search using beneficial ownership provisions under section 672.

Stock loans are considered a proxy for short sales.

Nobody else in the Australian stock lending community can verify these numbers and say the evidence before it runs counter to the claims.

FMG is sticking to the Orient figures and thinks the Data Explorer numbers are garbage.

Neither stock loans nor short sales are disclosed in any meaningful way in Australia.

FMG rejects any suggestion its statement highlighting the potential stock loans was aimed at thwarting short sellers and maybe even manipulating the market.

Instead, its disclosure was in accord with its continuous disclosure obligations.

Fortescue Metal (FMG) shares were sold down 10.2 per cent yesterday at $7.14 a share after closing up over 4 per cent the day before on the company's statement that it had discovered that over 10 per cent of its shares were subject to stock loans.

You could call this the short seller's revenge.

The story put around by friends of the company was that 258 million shares owned by 15 per cent share holder (440 million shares), Philip Falcone, were held by Lehman, Merrill Lynch and Goldman Sachs -- as custodians -- and then on-lent to Bank of New York which in turn on-lent them again.

Putting to one side the lack of a substantial shareholder notice from Falcone, the trouble with this line is it simply is not supported by other data.

The accompanying table from Data Explorer, which is the acknowledged source on global stock lending, shows that after peaking in July FMG stock loans have dwindled fast.

In fact, as of August 31, there were just 28 million shares on loan and a massive 170 million available for loan.

In other words, if someone wanted to short the stock, it would not be a problem; there are plenty of shares to rent for the purpose.

FMG's Forrest is maximum bullish on his Pilbara mining operations with plans to increase production from a maximum 55 million tonnes of iron ore to 100 million tonnes a year.

If the Chinese or anyone else wanted to buy the stock via a stock issue, then the asking price would be closer to the company's view of its net present value which is closer to $35 a share or five times the present share price. Still it is inconvenient for a company promoter when the stock price is being hammered.

Forrest, it should be noted, has criticised the practice of creating false rumours and then short selling, but not short selling per se.

There were of course other reasons to sell mining stocks yesterday with the closure of an Ospraie commodities fund run by Dwight Anderson which obviously has big ramifications in Australia.

But the real point about the FMG situation is how perfectly it highlights the lack of transparency in the stock market.

This works both ways in the wrong hands with company promoters able to claim that stocks are lent when they are not and in doing so manipulate the price.

Likewise short sellers can manipulate the price. The regulatory debate in Australia works by crisis which means when stocks are plummeting the politicians take notice and ask the regulators why they are sitting on their hands.

When the market is settled the pollies are looking elsewhere and the regulators sit on their hands.

If it's true that Andrew Forrest has exposed his major outside shareholder as in breach of the continuous disclosure rules, someone will move to clear up this entire mess.

Transparency is the regulator's best friend.

and....

Wild goose chase on Fortescue reveals an overdone market
Andrew Main | September 04, 2008



FORTESCUE Metals' Andrew Forrest has never been a blushing violet but his people may be turning into conjurers too.

Tuesday's announcement by Fortescue that "10 per cent of the company's shares have been the subject of stock loans" had shades of the lady being sawn in half.

Most observers jumped to the view that the custodian for Phillip Falcone's Harbinger Capital Partners in New York, the second- biggest holder after Forrest, had lent stock out to someone who had gone short.

"The stock loans were made by the owner's custodian and the owner has since advised the company that it will immediately rectify the situation," sounded like a messy about-turn by an errant custodian.

It was getting exciting but there was a drum roll, a flash, and the lady jumped out undamaged. There's no evidence that the shares were sold short at all.

One, there's a difference between lending stock and someone going short. As my colleague John Durie has pointed out, his source Data Explorers says that as of August 31, just 28 million FMG shares were on loan and 170 million were available to be lent. With 2.6 billion shares on issue, that total is just over 7 per cent. Two, it's very possible that Falcone, who's a wheeler dealer par excellence, has done nothing more exciting than offering his Fortescue shares as collateral for a loan elsewhere.

The Australian understands that the information came out of a Section 672 notice issued about a week ago by registry search specialist Orient Capital Pty Ltd on behalf of Fortescue, which has been trying to find out who actually owns its shares. Some short scandal.

A final thought. If any of the stock had been shorted, then original owner Harbinger Capital, which shows up as owning 15.83 per cent of the stock or 444 million of them, would have been obliged to file a substantial shareholder notice to the ASX. It didn't happen and the share price yesterday dropped 66c to $7.29. And Falcone knows exactly the difference between being long and short.

The moral of the tale is that in the absence of clear and transparent declaration by covered or uncovered short sellers, the market jumps at shadows and comes to all sorts of erroneous conclusions, not aided by the conjuring business about "the subject of stock loans".

Senator Nick Sherry is about to introduce a bill to parliament forcing the declaration of all short positions, covered or uncovered. There have been regular instances of overseas and local hedge funds refusing to disclose positions to their brokers, who in turn fail to inform the ASX, and that may or may not be fully sorted by the new legislation.

The wild goose chase on the Fortescue issue shows how overdue our market is for an extra dose of information on stock lending and short selling.


I think FMG is a becoming a bit of a bargain personally. But this is just my opinion and limited research

 

[agro]

Two news articles today of interest. Just dipped below $7 mark.


Falcone in a flap over Fortescue Metals
MARTIN COLLINS: John Durie | September 04, 2008

IF Andrew Forrest is right and two-thirds of Philip Falcone's shares are on loan, then Falcone must by definition be in breach of the law by not lodging substantial shareholder notices.

Whether the breach is intentional or not, either FMG's figures are wrong or Falcone is in breach.

The transparency around stock loans and short selling may be abysmal but one thing is clear: if you are a substantial shareholder and more than 1 per cent of your stock is lent then you must lodge a change in substantial shareholder notice.

The ASX looked at the FMG disclosure and was happy with it for two reasons: it is relying on the fact that Fortescue is aware of its obligations, and covered shorts are not reported in Australia.

In other words the ASX is presuming the innocence of Fortescue and lacks the physical evidence to question Fortescue's statement.

In short it is a disgrace.

The ASX disclosure policies, or more to the point, the lack of them, been beautifully exposed not by some heinous hedge fund but by the richest man in the land.

Forrest has had share register sleuths Orient Capital look at his register and they have uncovered that more 280 million shares were on loan.

Orient did its search using beneficial ownership provisions under section 672.

Stock loans are considered a proxy for short sales.

Nobody else in the Australian stock lending community can verify these numbers and say the evidence before it runs counter to the claims.

FMG is sticking to the Orient figures and thinks the Data Explorer numbers are garbage.

Neither stock loans nor short sales are disclosed in any meaningful way in Australia.

FMG rejects any suggestion its statement highlighting the potential stock loans was aimed at thwarting short sellers and maybe even manipulating the market.

Instead, its disclosure was in accord with its continuous disclosure obligations.

Fortescue Metal (FMG) shares were sold down 10.2 per cent yesterday at $7.14 a share after closing up over 4 per cent the day before on the company's statement that it had discovered that over 10 per cent of its shares were subject to stock loans.

You could call this the short seller's revenge.

The story put around by friends of the company was that 258 million shares owned by 15 per cent share holder (440 million shares), Philip Falcone, were held by Lehman, Merrill Lynch and Goldman Sachs -- as custodians -- and then on-lent to Bank of New York which in turn on-lent them again.

Putting to one side the lack of a substantial shareholder notice from Falcone, the trouble with this line is it simply is not supported by other data.

The accompanying table from Data Explorer, which is the acknowledged source on global stock lending, shows that after peaking in July FMG stock loans have dwindled fast.

In fact, as of August 31, there were just 28 million shares on loan and a massive 170 million available for loan.

In other words, if someone wanted to short the stock, it would not be a problem; there are plenty of shares to rent for the purpose.

FMG's Forrest is maximum bullish on his Pilbara mining operations with plans to increase production from a maximum 55 million tonnes of iron ore to 100 million tonnes a year.

If the Chinese or anyone else wanted to buy the stock via a stock issue, then the asking price would be closer to the company's view of its net present value which is closer to $35 a share or five times the present share price. Still it is inconvenient for a company promoter when the stock price is being hammered.

Forrest, it should be noted, has criticised the practice of creating false rumours and then short selling, but not short selling per se.

There were of course other reasons to sell mining stocks yesterday with the closure of an Ospraie commodities fund run by Dwight Anderson which obviously has big ramifications in Australia.

But the real point about the FMG situation is how perfectly it highlights the lack of transparency in the stock market.

This works both ways in the wrong hands with company promoters able to claim that stocks are lent when they are not and in doing so manipulate the price.

Likewise short sellers can manipulate the price. The regulatory debate in Australia works by crisis which means when stocks are plummeting the politicians take notice and ask the regulators why they are sitting on their hands.

When the market is settled the pollies are looking elsewhere and the regulators sit on their hands.

If it's true that Andrew Forrest has exposed his major outside shareholder as in breach of the continuous disclosure rules, someone will move to clear up this entire mess.

Transparency is the regulator's best friend.

and....

Wild goose chase on Fortescue reveals an overdone market
Andrew Main | September 04, 2008



FORTESCUE Metals' Andrew Forrest has never been a blushing violet but his people may be turning into conjurers too.

Tuesday's announcement by Fortescue that "10 per cent of the company's shares have been the subject of stock loans" had shades of the lady being sawn in half.

Most observers jumped to the view that the custodian for Phillip Falcone's Harbinger Capital Partners in New York, the second- biggest holder after Forrest, had lent stock out to someone who had gone short.

"The stock loans were made by the owner's custodian and the owner has since advised the company that it will immediately rectify the situation," sounded like a messy about-turn by an errant custodian.

It was getting exciting but there was a drum roll, a flash, and the lady jumped out undamaged. There's no evidence that the shares were sold short at all.

One, there's a difference between lending stock and someone going short. As my colleague John Durie has pointed out, his source Data Explorers says that as of August 31, just 28 million FMG shares were on loan and 170 million were available to be lent. With 2.6 billion shares on issue, that total is just over 7 per cent. Two, it's very possible that Falcone, who's a wheeler dealer par excellence, has done nothing more exciting than offering his Fortescue shares as collateral for a loan elsewhere.

The Australian understands that the information came out of a Section 672 notice issued about a week ago by registry search specialist Orient Capital Pty Ltd on behalf of Fortescue, which has been trying to find out who actually owns its shares. Some short scandal.

A final thought. If any of the stock had been shorted, then original owner Harbinger Capital, which shows up as owning 15.83 per cent of the stock or 444 million of them, would have been obliged to file a substantial shareholder notice to the ASX. It didn't happen and the share price yesterday dropped 66c to $7.29. And Falcone knows exactly the difference between being long and short.

The moral of the tale is that in the absence of clear and transparent declaration by covered or uncovered short sellers, the market jumps at shadows and comes to all sorts of erroneous conclusions, not aided by the conjuring business about "the subject of stock loans".

Senator Nick Sherry is about to introduce a bill to parliament forcing the declaration of all short positions, covered or uncovered. There have been regular instances of overseas and local hedge funds refusing to disclose positions to their brokers, who in turn fail to inform the ASX, and that may or may not be fully sorted by the new legislation.

The wild goose chase on the Fortescue issue shows how overdue our market is for an extra dose of information on stock lending and short selling.


I think FMG is a becoming a bit of a bargain personally. But this is just my opinion and limited research

god knows what is going on at the moment

should be a trading halt imo

wait for someone to scoop the sell side up...

if 5 Chinese steel companies already signed up for the preference shares and the fact that FMG has contracts for the next 12 years, someone is going to get a bargain,

no doubt the shorts will be covered..

i am holding regardless

 

[freddy2]

If the Chinese or anyone else wanted to buy the stock via a stock issue, then the asking price would be closer to the company's view of its net present value which is closer to $35 a share or five times the present share price.

What a joke.

Current market cap @ $7 = approx. $20 billion
Market cap @ $35 = approx $100 billion

For a company to be worth $100 billion it has to earn approximately $5 billion every year after tax, interest and capital spending (mining is an expensive business). Is this company even profitable yet? Even at the current market cap it has to earn about $1 billion per year to justify the valuation. For $20 billion would you rather own 100% of FMG or 66% of Woolworths or 33% of the Commonwealth Bank?