New posts

Reply to thread

Message

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.

<blockquote data-quote="simontitan" data-source="post: 330918" data-attributes="member: 19982">Hmm the Plot thickens. I got out at the $7.85 mark the other day, then this Fortescue mysteryJohn Durie | September 03, 2008 The AustralianSOMETHING doesn&#039;t wash with Fortescue Metal&#039;s claims that 10 per cent of its stock, or 280 million shares, had been &quot;the subject of stock loans&quot;.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 &amp; 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.</blockquote>

[QUOTE="simontitan, post: 330918, member: 19982"] Hmm the Plot thickens. I got out at the $7.85 mark the other day, then this [B]Fortescue mystery[/B] [I]John Durie | September 03, 2008[/I] 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. [/QUOTE]

Verification