Chapter 562: Comprehensive Short Selling
DS Group is the major shareholder of SEM Group, and SEM Group competes with Thomson Group for the acquisition of Reuters Group.
Therefore, Barron will not use companies related to him, at least in the open, to short the share price of Reuters Group, otherwise it will easily be suspected of unfair competition.
He is still very careful about this.
Therefore, this large-scale shorting of Thomson Group was carried out by a fund company registered in HK by Tianhe Capital.
Their shorting of Thomson Group this time is not just to make money, but mainly because Thomson Group's acquisition of Reuters Group is carried out in the form of cash plus stocks - although the cash part accounts for the majority, the decline in Thomson Group's stock price also means that the corresponding total acquisition price of Reuters Group has "shrunk".
Moreover, the sharp drop in its stock price will also cause a series of chain reactions, and even make Reuters Group reconsider whether the 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 in circulation, this is enough to cause its stock price to fall sharply.
The most important thing is the timing they chose this time.
If it is normal times, relying solely on their own funds to short 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 opponent's strength is there, and the fundamentals of Thomson Group are not too big.
But you have to know that it is almost October now, and the US 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 has already stood on the top of the mountain. All it needs is a small push to roll down... Under such a trend, with a large amount of funds from Tianhe Capital shorting, it can speed up the speed of the boulder falling...
If the Thomson family wants to maintain its own stock price against the trend, the effect will definitely be twice the result with half the effort.
At this time point, not only Tianhe Capital began to short Thomson Group, but also shorted the US stock market, the European stock market, and even the Japanese and Korean stock markets to varying degrees.
"We have started shorting Lehman Brothers since the stock price was above $80. Now their stock price continues to rise and has reached nearly $86. We have increased the amount of short-selling funds, and their stock price trend has quickly reflected that their stock price has stopped rising and started to fall slightly, which shows that the amount of funds bullish on Lehman Brothers has been exhausted, which is good news for us."
The Black Swan Fund has entered the second stage from the transaction of subprime loan debt CDO and related insurance bond CDS, which is the comprehensive short-selling of the stock market!
In the first stage, the Black Swan Fund successively obtained more than $35 billion in funds from the five major investment banks on Wall Street, including Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers, Bear Stearns, and a series of investment banks such as Citibank, Credit Suisse, Deutsche Bank, and BNP Paribas, through CDO betting 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 participate in the claims against insurance companies including the American Insurance Group...
When it advances to the second stage, the Black Swan Fund will increase its short-selling efforts in the American stock market!
The main targets of their short-selling are financial and insurance stocks including Merrill Lynch, Lehman Brothers, and Bear Stearns. In addition, because their funds are too large, the short-selling of these stocks only consumes a few of their funds. The remaining funds are used to target stocks in more industries, even including stock index futures.
For example, Lehman Brothers Bank, their stock price is now above $80, and the corresponding market value is close to $40 billion - it can be said that this is a very ideal short-selling target for them, with a high market value and high circulation. As one of the two investment banks on Wall Street that are most involved in the subprime bond business, they will be the most affected by the subprime crisis.
Well, the other one is Merrill Lynch, which is larger than Lehman Brothers and is also one of the main targets of the Black Swan Fund's 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 from the banking industry, and many stocks in the manufacturing industries such as telecommunications, technology, and automobiles, which have relatively high credit demand, 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 fund in HK shorting Thomson Group, they have also laid out short selling chips for the Japanese and Korean stock markets as well as the HK and Lijiapo stock markets.
But Barron's main focus now is not here, nor is it 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 an emergency rescue loan to Northern Rock Bank.
In fact, Northern Rock Bank has already started to experience a run since the 14th...
When it was too difficult, Northern Rock Bank issued another profit warning, pointing out that the rise in interest rates was unexpected, and the credit contraction problem led to a slowdown in asset growth. It is expected that the pre-tax profit in 2007 will be about 20% lower than expected.
The announcement of this news directly triggered a large-scale run on the same day.
Northern Rock Bank users began to line up at the door of the bank's branches, trying to withdraw their deposits in Northern Rock Bank...
At first, there were not too many people queuing, but the emergence of this situation exacerbated the panic.
Soon, the queues got longer and longer...
Because according to the Deposit Compensation Scheme formulated by the UK in 2001, depositors with deposits below 2,000 pounds can get back all their deposits when the bank goes bankrupt, and depositors with deposits exceeding 2,000 pounds up to 31,000 pounds can get back 90%, while depositors with deposits above this amount cannot get any guarantee.
This is the root cause of depositors' nervousness!
Because this means that unless your bank deposit is below 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, it is very likely that you can only get back 28,100 pounds, because deposits above 31,000 pounds are not guaranteed!
After this happened, the media also came out to add fuel to the fire, and their reports further worsened the situation.
In this regard, the Financial Times reported:
"The Bank of England has always been firmly opposed to rescuing banks that make easy lending decisions. It is impossible to expect it to rescue Northern Rock. The reputation and credibility of Melvin King, the boss of the banking industry and the head of the Bank of England, are in jeopardy. He has never been as unconfident as he is today. Indeed, his credibility is exposed in the spotlight..."
The Independent wrote:
"One thing is certain: Northern Rock must fight to save its reputation. On the one hand, as a brand, it can no longer win the trust of customers seeking loans and mortgages; on the other hand, if it is rescued by the central bank, then it will always be known as "rescued by the central bank."
Obviously, Barron is happy to see these media reports. After all, not only did Catherine Neville short the share price of Northern Rock Bank, but he also held a lot of short-selling chips.
And after this incident broke out, he directed his funds to increase their efforts and began to short Northern Rock Bank.
On that day, Northern Rock Bank's share price fell by more than 40%!