Chapter 562: Comprehensive Short Selling
DS Group is the majority shareholder of SEM Group, and SEM Group competes with Thomson Group for the acquisition of Reuters Group.
Therefore, Barron's short selling of Reuters Group's stock price will not use companies related to itself - at least visibly related to itself - otherwise it will easily be suspected of unfair competition.
He paid great attention to this point.
Therefore, this large-scale short selling of Thomson Group was carried out by a fund company registered in Hong Kong by Tianhe Capital.
Their short selling against the Thomson Group this time is not just to make money, but mainly because the Thomson Group's acquisition of the Reuters Group was carried out in the form of cash and stocks - although the cash part accounts for the majority. , but the decline in Thomson Group’s stock price also represents the corresponding “shrinkage” of the total purchase price of Reuters Group.
Moreover, the sharp drop in its stock price will also cause a series of chain reactions, and even cause Reuters Group to reconsider whether its merger with Thomson Group will drag itself down.
Of course, Thomson Group can use its own funds to "protect the market."
Although the Thomson family controls 70% of the shares of Thomson Group through Woodbridge Investment Company, and only about 30% of the shares are outstanding, this is enough to cause its stock price to fall significantly.
The main thing is the timing they chose this time.
If in normal times, you only rely on your own funds to short-sell a company of the size of Thomson Group, even if it will be effective, it may not be sustainable, and the effect is also questionable.
After all, the other party's strength is there, and the Thomson Group's fundamentals don't have much of a problem.
But what you need to know is that October is coming soon, and the U.S. stock market is about to reach the peak before the subprime mortgage crisis. Next, it will be affected by the further outbreak of the subprime mortgage crisis, and the entire stock market will start a downward trend.
This is equivalent to a boulder that is already standing on the top of the mountain. All it needs is a small push to make it roll down... Under such a trend, Tianhe Capital's large amount of short-selling funds can accelerate the The speed at which the boulder falls...
If the Thomson family wants to buck the trend and maintain its stock price, the result will definitely be half the result with half the effort.
At this point in time, not only Tianhe Capital began to short-sell Thomson Group, but also everyone from the U.S. stock market to the European stock market, and even the Japanese and Korean stock markets had begun short-selling to varying degrees.
“We have started shorting Lehman Brothers since the stock price was above 80 US dollars. Now their stock price continues to rise and has reached close to 86 US dollars. We have increased the amount of funds for short selling, and its stock price trend has quickly declined. In response, their stock prices stopped rising and began to fall slightly, which shows that the funds bullish on Lehman Brothers have been exhausted, which is good news for us.”
The Black Swan Fund has moved from trading on subprime loan debt CDOs and related insurance bond CDS to the second stage, which is a comprehensive short-selling of the stock market!
In the first stage, black swan funds successively started from the five major investment banks on Wall Street, including Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, and Bear Stearns, as well as Citibank, Credit Suisse, Deutsche Bank, and BNP Paribas. A series of other investment banks have obtained more than US$35 billion in funds through CDO gambling agreements and the sale of CDS insurance bonds!
And until now, the Black Swan Fund still holds a considerable number of CDS insurance bonds, and will also participate in claims against insurance companies including American Insurance Group...
When advancing to the second stage, the Black Swan Fund will increase its short selling efforts in the U.S. stock market!
The main objects they shorted were financial and insurance stocks including Merrill Lynch, Lehman Brothers, and Bear Stearns. In addition, because their funds were too large, the short selling of these stocks only cost them a few cents. One of the funds was used, and the remaining funds were targeted at stocks in more industries, including stock index futures.
Take Lehman Brothers, for example. Their stock price is now over 80 US dollars, and the corresponding market value is close to 40 billion US dollars. It can be said that this is a very ideal short-selling target for them. It has a high market value and high liquidity, and it is one of the major Wall Street investment banks. One of the two investment banks with the deepest involvement in subprime mortgage bond business, they will be the most affected by the subprime mortgage crisis.
Well, the other one is Merrill Lynch, which is larger than Lehman Brothers and is one of the main targets of black swan funds' short selling.
In Europe, companies including DS Group's funds and William Weber Capital have also laid out a dragnet. Their short selling also started in the banking industry, and has a high demand for credit in manufacturing industries such as telecommunications, technology, and automobiles... many Stocks have become the targets of their short selling.
The battlefields of Tianhe Capital and Rich23 Capital are mainly in Asia. In addition to Tianhe Capital’s funds in HK shorting Thomson Group, they have also laid out short-selling chips for the Japanese and Korean stock markets as well as the stock markets of HK and Lijiapo.
But now Barron's main focus is not on this, nor on SEM Group's acquisition of Reuters Group, but...
On September 25, the Bank of England announced that it would inject 10 billion pounds into the money market and provide emergency rescue loans to Northrock Bank.
In fact, runs on Northrock Bank began on the 14th...
When it was too difficult, Northrock Bank issued a profit warning, pointing out that the rise in interest rates was unexpected and the credit shrinkage problem has led to a slowdown in asset growth. It is expected that pre-tax profits in 2007 will be about 20% lower than expected.
The announcement of this news directly triggered a large-scale run on depositors that day.
Northen Rock Bank users began to line up at the bank's branches, trying to withdraw their deposits from North Rock Bank...
There weren't many people queuing up at first, but the emergence of this situation intensified the panic.
Soon, the queue was getting longer and longer...
Because according to the "Deposit Compensation Plan" formulated by the British in 2001, depositors with deposits of less than 2,000 pounds can recover all their deposits when the bank goes bankrupt. Depositors with deposits exceeding 2,000 pounds to 31,000 pounds can recover 90%, while depositors with more than this amount can recover 90% of their deposits. No guarantee can be obtained.
This is the fundamental reason why savers are nervous!
Because this means that unless your bank deposit is less than 2,000 pounds, if you deposit 31,000 pounds and the bank goes bankrupt, you can only get back 28,100 pounds...
Well, if your deposit exceeds this amount, you will most likely only be able to get back 28,100 pounds, because there is no guarantee for deposits above 31,000 pounds!
After this happened, the media also came out to add fuel to the flames, and their reports further worsened the situation.
The Financial Times reported:
"The Bank of England has always been firmly opposed to bailing out banks that make lending decisions easily, and it is impossible to expect it to lead the rescue of Northron Rock. The reputation and credibility of Melvin King, the boss of the banking industry and the boss of the Bank of England, are at stake. He has never been less confident than he is today, and indeed, his credibility is under the spotlight..."
The Independent wrote:
“One thing is certain: Northenroc must fight to save the damage to its reputation. On the one hand, as a brand it can no longer win trust from customers seeking loans and mortgages; on the other hand, if If it gets bailed out by the central bank, it will always be known as 'bailed out by the central bank'."
Obviously, Barron is happy to see these media reports. After all, not only did Catherine Neville short the stock price of Northrock Bank, but he also held a lot of short-selling chips himself.
And after this incident broke out, he directed his funds to intensify their efforts and began to short-sell Northroc Bank.
On that day, the share price of Northrock Bank fell by more than 40%!
