Article in Evening Standard makes interesting reading in this regard, saying the short position on MONI is estimated on 850m shares, some 30% of the company's equity, meaning all the shares that can be borrowed to short MONI already borrowed...
I wonder if they are going for the kill this time, making a profit by collapsing MONI share price...
The following paragraph makes sense in this case:
"The Stock Exchange was never meant to work like this and it will cease to work if the practice is not brought under control. Transparency is vital if market abuse is to be avoided. At the very least, hedge funds need to be forced out into the open and their short positions published on a minute-by-minute basis so that market participants can see how share prices are being manipulated. It is not something the Financial Services Authority can afford to ignore."
Riz
by Anthony Hilton, Evening Standard
MASSIVE short selling by hedge funds is believed to lie behind the collapse of Marconi's shares from 50p at the beginning of this week to less that 30p today. More than 160m shares went through the market on Thursday, and the short position is estimated at close on 850m shares, some 30% of the company's equity. Every share that can possibly be borrowed to cover short positions has been borrowed.
The market has never seen anything like it. One of Britain's biggest and most important companies has been reduced to the status of a gaming chip in the Stock Exchange casino. Were it only the boys in red braces having a bit of fun, it might not be too harmful but it has gone way beyond that. This short-selling, which is designed to engineer a collapse in the company's share price and then to profit from it, seriously undermines Marconi's ability to survive.
We saw with Marks & Spencer how a collapsing share price not only destroyed internal morale but also prompted customers and suppliers to have second thoughts about whether they wanted to continue to do business with the company. The same thing could happen with Marconi. Staff morale has probably already been shredded, but if customers and suppliers decide to move their business elsewhere, sales will collapse even further and the company ultimately will run out of cash. The short selling will have been seen to have killed off the company.
This underlines how speculative capital has too much firepower, and how there is now a huge mismatch between the resources of those running the companies and those who have the power to take investment decisions. Hedge fund managers pursuing ruthless strategies for their own gain are creating huge costs elsewhere in the system, costs which ultimately will destroy public confidence in the stock market as a place where the process of price formation is transparent and honest.
The Stock Exchange was never meant to work like this and it will cease to work if the practice is not brought under control. Transparency is vital if market abuse is to be avoided. At the very least, hedge funds need to be forced out into the open and their short positions published on a minute-by-minute basis so that market participants can see how share prices are being manipulated. It is not something the Financial Services Authority can afford to ignore.
Shares flaw
WHEN the FTSE 100 index is revised later this month, it is expected to see the final laying of the ghost of the dotcom boom. Marconi will drop out, of course - and may be the first company on exiting to go straight out of the bottom of the FTSE 250, too.
Marconi, as GEC, was one of the original constituents of the FTSE 100 15 years ago. When it goes, only 24 of those 100 will be left. This underlines the superficiality of claims that equities are the best long- term investment. Such claims are almost always based on the performance of an index, which paints an upwardly biased picture of overall share performance because any company that fails in the index gets turfed out.
People claim that real returns on shares for the past 100 years have averaged 5% a year, but less than 2% of this is attributable to capital gain and there is no allowance for tax. The 5% figure also assumes all dividend income has been reinvested but takes no account of the fact that, so far as an individual is concerned, the dividend would be taxed so there would be much less available to invest. It means that 5% would be impossible to achieve.
© Associated Newspapers Ltd., 07 September 2001
Terms and Conditions
This Is London
I wonder if they are going for the kill this time, making a profit by collapsing MONI share price...
The following paragraph makes sense in this case:
"The Stock Exchange was never meant to work like this and it will cease to work if the practice is not brought under control. Transparency is vital if market abuse is to be avoided. At the very least, hedge funds need to be forced out into the open and their short positions published on a minute-by-minute basis so that market participants can see how share prices are being manipulated. It is not something the Financial Services Authority can afford to ignore."
Riz
by Anthony Hilton, Evening Standard
MASSIVE short selling by hedge funds is believed to lie behind the collapse of Marconi's shares from 50p at the beginning of this week to less that 30p today. More than 160m shares went through the market on Thursday, and the short position is estimated at close on 850m shares, some 30% of the company's equity. Every share that can possibly be borrowed to cover short positions has been borrowed.
The market has never seen anything like it. One of Britain's biggest and most important companies has been reduced to the status of a gaming chip in the Stock Exchange casino. Were it only the boys in red braces having a bit of fun, it might not be too harmful but it has gone way beyond that. This short-selling, which is designed to engineer a collapse in the company's share price and then to profit from it, seriously undermines Marconi's ability to survive.
We saw with Marks & Spencer how a collapsing share price not only destroyed internal morale but also prompted customers and suppliers to have second thoughts about whether they wanted to continue to do business with the company. The same thing could happen with Marconi. Staff morale has probably already been shredded, but if customers and suppliers decide to move their business elsewhere, sales will collapse even further and the company ultimately will run out of cash. The short selling will have been seen to have killed off the company.
This underlines how speculative capital has too much firepower, and how there is now a huge mismatch between the resources of those running the companies and those who have the power to take investment decisions. Hedge fund managers pursuing ruthless strategies for their own gain are creating huge costs elsewhere in the system, costs which ultimately will destroy public confidence in the stock market as a place where the process of price formation is transparent and honest.
The Stock Exchange was never meant to work like this and it will cease to work if the practice is not brought under control. Transparency is vital if market abuse is to be avoided. At the very least, hedge funds need to be forced out into the open and their short positions published on a minute-by-minute basis so that market participants can see how share prices are being manipulated. It is not something the Financial Services Authority can afford to ignore.
Shares flaw
WHEN the FTSE 100 index is revised later this month, it is expected to see the final laying of the ghost of the dotcom boom. Marconi will drop out, of course - and may be the first company on exiting to go straight out of the bottom of the FTSE 250, too.
Marconi, as GEC, was one of the original constituents of the FTSE 100 15 years ago. When it goes, only 24 of those 100 will be left. This underlines the superficiality of claims that equities are the best long- term investment. Such claims are almost always based on the performance of an index, which paints an upwardly biased picture of overall share performance because any company that fails in the index gets turfed out.
People claim that real returns on shares for the past 100 years have averaged 5% a year, but less than 2% of this is attributable to capital gain and there is no allowance for tax. The 5% figure also assumes all dividend income has been reinvested but takes no account of the fact that, so far as an individual is concerned, the dividend would be taxed so there would be much less available to invest. It means that 5% would be impossible to achieve.
© Associated Newspapers Ltd., 07 September 2001
Terms and Conditions
This Is London
