Chapter 213

Chapter 213

Hyunjoo noona said while putting on her glasses.

“As you can see, there are not one or two companies that have suffered losses due to Big One.”

I publicized this fact several months before the Big One happened. But few believed me.

Among IBs, all but Golden Gate suffered losses, and hedge funds also suffered large losses. Although we made over $10 billion thanks to you.

“It comes out aggressively to somehow recoup losses.”

Short selling refers to a trading technique in which stocks that are not available are sold first and then bought back later. We also have a history of short selling Suseong Electronics during the L6 crisis.

Short selling has several net functions, such as providing liquidity to the market, preventing overheating, and allowing hedging.

Although almost all countries allow short selling, the majority of individual investors are negative about short selling. Some even call for abolition.

Because there are so many problems.

Short selling is an investment method used when a stock price is predicted to fall.

Whether you short-sell or not, stocks that will fall will fall. In this case, the short selling serves to rationally adjust the market.

The problem is that the stock price falls excessively from its actual value due to short selling, or the stock price declines by deliberately exaggerating the crisis and spreading misinformation.

This time alone, foreign securities firms are pouring out negative reports on the entire Korean market.

The stock price is often compared to the owner and a dog out for a walk. Sometimes they go ahead or behind their owner, but in the end they move with the owner. In this case, the owner is the real value of the company.

Even if the stock price drops excessively due to short selling, it will recover over time anyway. However, in the process, individual investors with little capital and slow information will suffer a lot.

In fact, the biggest problem with short selling is that it is difficult for individual investors to access it.

In the case of the United States and Japan, individual investors can short-sell as long as they have a deposit. However, in Korea, it is practically impossible for individual investors to short sell.

Institutions and foreigners overwhelm individuals in capital, information, and transaction fees, and can even use short selling. On the other hand, individuals can only respond by buying and selling.

If OTK Company was not a foreign corporation and had not grown in capital, we would have had to wash our fingers during the L6 crisis as well.

“As you can see, there is a lot of short selling throughout the market. I think the silver car is the main target, followed by bio and consumer goods.”

“Who is the leading force?”

“Albert.”

I frowned.

“Are they them again?”

The official name is Albert Managements.

Although it is a self-proclaimed activist fund and investment management company, the reality is close to a Vulture Fund. It got its name from the fact that it looks like an eagle that eats a corpse when it rushes to profit from a company in danger.

Its main job is to acquire bad companies or bad debts at low prices and sell them back at high prices.

Up to this point, this is a normal investment category, so I’m not going to say anything. However, in this process, it uses a truly extraordinary method.

A famous anecdote is that he bought Peruvian government bonds in 1996 and obtained five times the amount by confiscating the private plane of the former president who fled abroad. And in 2002, at the time of the Argentine moratorium, over $2 billion of government bonds were bought at a low price, and then they sued the U.S. court and seized Argentine naval vessels anchored in foreign ports. earned a profit

The international community condemned this speculative behavior, but Albert did not blink.

It’s not illegal, but what’s the problem?

It was actually legal. What you’re doing is like garbage.

“How big is Albert?”

“40 billion dollars.”

I was surprised.

“When did you grow so much?”

“The average annual return since founding is 16%. If you look at the recent yield alone, it is 20%. That’s enough for investors to rush in with their money.”

Since I do anything that makes money, I’ve been talking about corporate governance restructuring lately.

Hyun-joo’s older sister exhaled cigarette smoke and said.

“Recently, the Korean market seems to be doing well. Because the degree of openness is large compared to the size of the financial market, it is easier to invest money and easier to withdraw money.”

This is not the first time the Korean stock market has been swayed by foreign capital. Even Suseong Electronics recently plunged 5 percent in one day due to the Merrill Lynch report concerned about oversupply of semiconductors.

It recovered within a few days, but in the meantime, some lost and some profited.

“Are you targeting Eunsung Cha this time?”

“The car owners are sensitive to the game. In a situation where they are already experiencing difficulties, they even have a recall, so they deserve to be targets. Something similar happened during the financial crisis. What comes to mind when you think of a short sale of a car owner?”

immediately remembered

“Volkswagen short selling situation?”

Ellie nodded her head as if she had thought of the same thing.

“It was a very absurd case.”

Taek-gyu had a look on his face that he didn’t know.

“what is that?”

“It happened during the financial crisis.”

The various accidents that occur in finance are often not known to the general public. Still, this was a pretty big event, so it was on the news a lot at the time. I found out later because I was young.

2008 was a difficult year for automakers. A car is the second biggest asset after a house. With the financial crisis not knowing what would happen tomorrow, no one wanted to buy a new car, and car sales plummeted.

Auto stocks plummeted hopelessly, and were expected to fall further in the future. For this reason, hedge funds targeted auto stocks and poured short sales.

Volkswagen was no exception. At that time, Volkswagen’s stock price soared from 200 euros to 400 euros in a short period of time due to a management dispute with Porsche.

Anyone can see that the stock is overvalued compared to its actual value.

Hedge funds cannot miss this great opportunity. All at once they poured short selling on Volkswagen stock.

For about a month, it sold 12 percent of its total shares through a short sale, and used live ammunition alone exceeded 10 billion euros.

“So what happened?”

“Volkswagen stock price halved.”

“Then the hedge fund won’t win?”

“Everyone thought so.”

Now, all you have to do is buy the stock that has plummeted, pay off the short sale, and leave with a huge profit.

By the way… … .

“Suddenly there is a problem.”

“What problem?”

Hyunjoo’s older sister said.

“Porsche Holdings announced that it had acquired a 42.6 percent stake in Volkswagen. He also announced that he would increase his stake to 50 percent within this year and 74.1 percent by next year using a call option.”

Ellie added an explanation.

“20.1% of Volkswagen’s stock is owned by the state of Lower Saxony, where its headquarters is located. This is something that will never be on the market.”

Both know the percentage accurately. People in the financial world really like this kind of talk.

I kept explaining.

“lets think. Porsche owns up to 74.1 percent of Volkswagen, plus the 20.1 percent owned by Lower Saxony is 94.2 percent. Then only 5.8% of the volume circulated in the market. But hedge funds sold 12 percent short.”

Taehyung closed his eyes.

“Then what will happen?”

“How is it? Even if we buy all the quantities distributed in the market, there is a situation where short covering is impossible.”

Somehow, before Porsche can increase its stake further, it has to buy back Volkswagen stock and pay off the short sale.

After the announcement of Porsche.

As soon as the market opened, hedge funds bought Volkswagen stock at random.

“There is another problem here.”

Due to the sudden stock price surge, Volkswagen was included in the DAX30 index, a collection of German blue-chip companies. As a result, even institutional investors started buying before the stock price rose further, and even bought index funds and programs.

There are many people who want to buy it, but the quantity is dry.

The stock price of Volkswagen soared 150 percent in one day, exceeding 500 euros, and the next day, exceeding 1,000 euros (the German stock market does not have a cap system).

It had more than quadrupled in just two days.

The market capitalization also increased more than four times, and Volkswagen surpassed ExxonMobil, which was the undisputed number one at the time, to become the world’s number one company by market capitalization.

“If you think about it, it’s amazing. We did not develop a new product, nor did our sales increase.”

Everything is the same, only the market capitalization has quadrupled due to the mischief of the speculators.

In the end, the situation was settled when Porsche withdrew its purchase plan, but in the meantime, Porsche happily sold its Volkswagen shares.

Porsche’s 2008 net profit increased by 50 per cent compared to the previous year, while other automakers were struggling with declining net income. Would you have made such a profit by selling your car well?

On the other hand, hedge funds that were short-selling took astronomical losses and withdrew. And Adolf Mekl, the fifth richest man in Germany, who took part in the short sale, committed suicide by throwing himself into the railroad.

It was a time when both the government and individuals were keen on short selling of hedge funds, so most of the reactions were unfavorable.

“When hedge funds are determined to attack, the market is hard to beat. Even so, Golden Gate has done a lot of similar things.”

Korea is one of the world’s leading manufacturing powerhouses. Even if you go to CES right now, you can find Korean products all over the place. Excessive conglomerate-centered and export-driven economy produced various side effects, but anyway, thanks to the activities of large companies such as Suseong Electronics and Eunsung Motors, the country reached the threshold of advanced countries by earning a huge current account every year.

However, unlike the world-renowned industrial capital, the financial capital’s report card is disastrous.

Hyunjoo noona said with a sigh.

“In a nutshell, the industry is making money, and it is being ripped off by finance.”(Read more @ wuxiax.com)

It is natural to invest and earn dividends or profits from the sale. However, the problem is that it cannot properly respond to taking money out of such speculative behavior.

Ellie said something.

“It is not the first time that speculative capital has caused controversy in the Korean market.”

At the time of the International Monetary Fund (IMF), many domestic companies were sold at low prices to foreign capital.

One of the most well-known incidents is the stealing of KEB by the American private equity fund Lone Star. After that, Kanline Group plundered HB Bank in a similar way. (The person who succeeded in this was RCK Bros. Chairman Ryu Cheol-gyun)

Tiger Fund ran a stake competition against SSK Telecom and stole 630 billion won, and then Sovereign attempted to seize management rights against SSK holding company and succeeded in stealing 900 billion won again. Shouldn’t we be suspicious of the structural problem?)

And Carl Icahn bought a stake in KT&G and devoured 150 billion won by meddling in management.

This is the tip of the iceberg, and a few books are not enough to enumerate all the cases of plunder.

On the other hand, it is extremely rare for Korean capital to be robbed in foreign markets. If I had to pick one of the biggest success stories, would it be that OTK Company robbed the UK and Japanese foreign exchange markets at the time of Brexit? (However, OTK Company is classified as an American capital).

“In the eyes of speculative capital, Korea is a good market.”

Taek-gyu crossed his arms and said.

“It’s not a fucking republic.”

Due to the Big One, the economy shrank as consumer sentiment decreased, and Korea, which accounts for a large proportion of exports, took a direct hit. In addition, hedge funds have decided to sell short and the stock market has continued to decline and the exchange rate rises.

However, this is only because Seosung Electronics, which has the largest share of market capitalization, is holding up, and if you look at Seosung Electronics, the decline in the stock market is even greater. Even Suseong Electronics fell by 20 percent considering the rising exchange rate.

In addition, the president is the one who caused the incident, and problems arise during the regime change, and neither the ruling party nor the opposition party is responding properly. Eun Sung-cha is also in a cluttered state due to overlapping issues with the recall, the resignation of Chairman Han Min-koo, and the succession of management rights.

Knowing that, hedge funds must have decided to do this.

The problem is that only subcontractors and individual investors are dying in the process. As always, even when high-ranking people cause problems, it is the common people who suffer.

By the time hedge funds leave the market with huge profits, individual investors will suffer big losses and parts makers will go bankrupt.

However, the government cannot directly regulate speculative capital. This is because of problems such as the WTO or ISD (Direct Litigation System between Investor States).

In fact, in the case of Lone Star, they filed a complaint with the ISD, claiming that they suffered losses due to the delay in approval of the sale by the Korean government. Even if you see profits like that, you will be able to take the compensation money wisely.

개새끼들… … .

In fact, it is speculative capital that can best deal with speculative capital. Just like Porsche smashed the back of a hedge fund by making a false disclosure that it did not intend to keep.

I thought for a moment and then said.

“Isn’t there a good way to fuck them?”