Money Stuff: Pump and Dump and Pull the Rug
Matt Levine, 01 July 2021
Here’s a thing you can do. You start a company and sell some stock to the public. You say “we are a good company and we plan to do good things, give us money to do them.” You sell, say, 10% of the company to the public at a low price. You keep the other 90% for yourself, as the founder of the company. Then you start putting out press releases saying “we did a bunch of good things!” These press releases are not true. Also you buy a bit of the publicly traded stock for yourself, to create volume and move the price up. Investors read the press releases and see the buying activity, and they think the stock is good. So they buy it. The stock — the 10% that is publicly traded — goes up. The price is now high. Then what you do is, you sell your stock — the 90% that you kept — at the new high price. Then you close up the company and move on to your next scam. Continue reading “Article: Money Stuff: Pump and Dump and Pull the Rug”
Amazon Got Some Warrants
Matt Levine, 30 June 2021
A recurring theme of this column is that if you have the power to make the price of a financial asset go up, you should (1) do that but (2) buy a lot of it first. So for instance Tesla Inc. is a big company and its chief executive officer, Elon Musk, is a famous influential guy with a lot of Twitter followers. So when Tesla announced that it would start accepting Bitcoin as payment for its cars, the price of Bitcoin went up. This was very predictable. So what did Tesla do? It bought $1.5 billion of Bitcoin before announcing the news, and then Bitcoin went up and it had an immediate gain. 1
I am a simple man and to me this seems good. Buy a thing, create good news for the thing, announce that news, watch the price of the thing go up. In general I think it is under-utilized, as a strategy. You don’t hear stories about, like, Moderna Inc. running a successful trial of its coronavirus vaccine and buying a ton of call options on cruise lines and airlines before announcing the news. That would have been a good trade! Continue reading “Article: Amazon Got Some Warrants”
Under Armour Sold Some Clothes Early
Matt Levine, 04 May 2021
One theory is that the price of a share of stock reflects the present value of its future cash flows in perpetuity. People buy stock today not because they expect high profits tomorrow, but because they expect high profits over the long run. Investment decisions that cost money today, but that will bring in much more money in five years, increase the net present value of the stock, so the shareholders should support them.
Another theory is that public markets are myopically focused on the short term. Investors care only about this quarter’s earnings; they buy stocks whose earnings go up each quarter and sell stocks whose earnings go down. A decision that reduces earnings today, in exchange for higher earnings in the future, is bad, and shareholders will punish a company that makes those decisions. Continue reading “Article: Under Armour Sold Some Clothes Early”
GameStop’s CEO Goes Out on Top
Matt Levine, 26 April 2021
Is George Sherman one of the greatest public-company chief executive officers in American history? He became CEO of GameStop Corp. on April 15, 2019. The stock closed at $8.94 per share that day. On April 19, 2021 — almost exactly two years later — GameStop announced that he will be stepping down by July. The stock closed at $164.37 that day. That’s a 1,739% return over his two-year term, or about 325% annualized. (The S&P 500 index was up 43%, or about 20% a year, over those two years.) GameStop’s market capitalization went from about $900 million to about $11.5 billion; Sherman added about $10.5 billion of shareholder value in two years. 1
How much should he get paid, for doing this amazing work for shareholders? A billion dollars? Two billion? If GameStop’s shareholders had only gotten the S&P 500 return over the last few years, they’d have missed out on more than $10 billion in value; I suppose you could make a case that they should be willing to pay Sherman up to $10 billion for his magic touch. Continue reading “Article: GameStop’s CEO Goes Out on Top”
Ex-Deutsche Traders Urge 2nd Circ. To Nix Libor Convictions
Stewart Bishop, 14 April 2021
Two former Deutsche Bank traders on Wednesday argued that the Second Circuit should reverse their convictions for Libor-rigging, saying the government failed to prove they violated any of the applicable rules governing the benchmark interest rate.
Matthew Connolly and Gavin Black in 2018 were convicted at trial of wire fraud and conspiracy for their roles in a purported scheme to tweak lending estimates included in Libor to benefit the bank’s derivatives trading positions. Continue reading “Article: Ex-Deutsche Traders Urge 2nd Circ. To Nix Libor Convictions”
Matt Levine is a columnist for Bloomberg News covering finance and business. Levine has previously been a lawyer, investment banker, law clerk, and has written for a number of newspapers and financial sites. His newsletter, Money Stuff, is one of the most popular on Wall Street with over 150k subscribers.
After graduating Levine was a mergers and acquisitions lawyer for the law firm Wachtell, Lipton, Rosen & Katz. He later went on to become an investment banker for Goldman Sachs, where he structured and marketed corporate equity derivatives for four years. Levine was also a high school Latin teacher and a law clerk for the U.S. Court of Appeals for the 3rd Circuit.[ Continue reading “Journalist: Matt Levine”
The War On Wall Street: GameStop Sparks Revolution With Retail Investors
Anat Alon-Beck, 01 February 2021
I don’t know about you, but I’ve been glued to the financial news during the past week.
And, for the first time, both my husband and my son were actually interested in my work. It is mind-boggling.
My husband first told me these stories of people making exorbitant amounts of money trading stock options, and no, not people we know from the investment community. My son, who turned 11 this month, wanted to know what’s all the buzz in the news about his favorite store: GameStop GME +0.9%. Continue reading “Article: The War On Wall Street: GameStop Sparks Revolution With Retail Investors”
Our Financial Oligarchy; Emperors of a Brave New World
They own the regulators; they own the brokerage houses; they own the clearing houses; they own all of your investments; and it’s even been shown that they can exert complete control over the government.
To understand how these banks exert complete control over our financial system, one must first understand the securities clearance system.
In the United States of America, there is only one central clearinghouse: The Depository Trust and Clearing Corporation, and for almost 50 years they have maintained a virtual monopoly over this essential service.
It is a private corporation that is owned by these mega-banks and brokers.
Read full free book online with many illustrations
PDF (470 Pages): Our Financial Oligarchy Back-Up
Aron Levine is the Head of Consumer Banking & Investments and the Consumer Investments group at Merrill Edge. Levine joined the company through Fleet Financial group in 1993 and has held leadership roles in Commercial Real Estate Banking, Marketing, Corporate Strategy, and Global Wealth Management. He graduated from the University of Rochester with a degree in both Economics and History.
Merrill Edge aka “MLPF&S” or “Merrill”
Here’s Why Shares of Ballard Power Systems Sank 18% in January
Scott Levine, 06 February 2018
Shares of Ballard Power Systems (NASDAQ:BLDP), an industry leader in fuel cell solutions, plunged more than 18% last month, according to data provided by S&P Global Market Intelligence. The decline follows a report from Spruce Point Capital that cast a critical eye on the company and assigned a long-term price target for the stock of $1.15 to $2.50. Through 2017, Ballard’s stock had risen 167%, ending the year at $4.41.
Ballard has high hopes for its success in the Chinese market — by providing solutions to bus and truck manufacturers — over the next several years. In fiscal 2016, for example, the company attributed 39% of its revenue to sales there, and forecasts that it will contribute 45% to its top line in fiscal 2020. However, it’s less optimistic about success in other markets, guiding for sales in North America (its second-largest source of revenue) to remain stagnant at 33% from fiscal 2016 to fiscal 2020 and sales in Europe to slide from 22% to 18% during the same period.
Continue reading “Article: Here’s Why Shares of Ballard Power Systems Sank 18% in January”
Dole Food Had Too Many Shares
Bloomberg, 17 February 2017
In 2013, tropical-fruit tycoon David Murdock, who was the chairman, chief executive officer and biggest shareholder of Dole Food Co., took it private for $13.50 a share. A lot of shareholders felt that that price was way too low, and that Murdock had sandbagged the shareholders by driving down the value of the company so he could buy it cheaply for himself. So they sued, and they won. In 2015, the Delaware Chancery Court ordered Murdock to pay shareholders another $2.74 a share, plus interest. There was a class action on behalf of shareholders, covering 36,793,758 shares, and after the court ruled in their favor, the class lawyers informed the shareholders and asked them to submit a form to claim their $2.74 a share.
Read full article.
Comment: Who sold all the fake shares? Who paid the dividend to shareholders?
Dole Food Had Too Many Shares
It’s enough to make you wish for a blockchain.
Bloomberg, 17 February 2017
Oops! Somehow shareholders owned 33 percent more Dole Food shares than there were Dole Food shares.
Continue reading “Article: Dole Food Had Too Many Shares It’s enough to make you wish for a blockchain.”
Robot Funds and Bank Regulation
Matt Levine, 04 August 2016
What’s Steve Cohen up to? Stamford Harbor Capital, the new firm started by Steven Cohen and led by a longtime deputy, is working with a third-party marketing company that’s meeting with potential clients to gauge interest in investment vehicles that could be started as soon as 2018. Continue reading “Article: Robot Funds and Bank Regulation”
SEC backs investors’ claim Merrill rigged ARS market, lawyer says
jgoff, 08 December 2011
Auction-rate securities holders seeking to win back part of the $330 billion they’ve invested, may get help from a U.S. Securities and Exchange Commission legal brief supporting claims that Merrill Lynch & Co. rigged the moribund market, a lawyer involved in the case said. Continue reading “Article: SEC backs investors’ claim Merrill rigged ARS market, lawyer says”
Former FBI Agent Pleads Guilty to Obstruction of Justice
United States Attorney’s Office, 23 June 2005
ROSLYNN R. MAUSKOPF, United States Attorney for the Eastern District of New York, and JOHN A. KLOCHAN, Acting Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office, announced that LYNN WINGATE, a former Special Agent of Federal Bureau of Investigation, pleaded guilty this afternoon to obstruction of justice in connection with her role in interfering with a grand jury’s investigation relating to Amr “Anthony” Elgindy and former FBI Agent Jeffrey A. Royer by accessing the FBI’s confidential law enforcement computer system and then relaying pertinent confidential information to Royer, who was one of the subjects of the investigation.
Access archived page.