Britannia Radio

1. HBOS: Where are the shorts?

   So those greedy short-selling spivs are responsible for HBOS’s share price collapse? This chart would suggest otherwise.

   From Data Explorers, showing the bank’s market cap on loan this week was actually less than 3 per cent - nowhere the July high. In comparison, Fannie & Freddie, before they were nationalised, were about 40 per cent on loan:
   

   All of which conflicts of course, with what was said by the bank and the FSA when banning short-selling.

   If bears were legitimately unloading what looked to be a risky investment - a bank that, by UK Chancellor Alistair Darling’s own admission, had a “problem” for several weeks, what’s next on the FSA’s horizon? A ban on selling, we guess.

   This entry was posted by Tracy Alloway on Friday, September 19th, 2008 at 7:58 and is filed under M&A, Capital markets,Hedge funds. Tagged with fsa, hbos, short-sellers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2. 
   
3. Posted by bsb [report]

   HBOS were in a worse position in fact, because they did not have the option of simply dropping onto the SVR

4.    8:11Posted by pitbull [report]

   I’m sick of hearing on the BBC (and even on the lips of intelligent friends who should know better) that HBOS was atcually solvent, and that the putative takeover was only caused by the fall in its share price (and hence by the short sellers).
   I have tried explaining (tactfully) to anyone who will listen that HBOS are in exactly the same position as the homeowner with a fixed term discounted mortgage, who suddenly finds themselves unable to afford the replacement finance. It’s an uphill struggle.
   The BBC should be ashamed of themselves for distributing this shameful propaganda.

   
   

   Posted by pitbull [report]

   bsb: V true
   G Cox: are you saying that to assess the significance of the amount of stock on loan, we should normalise by the transaction volumes?
   It still doesn’t alter the fact that the HBOS surrender was probably caused more by fundamental insolvency that anything else, and that the collapsing share price was just a manifestation of a deeper malaise - amplified by short selling.

   
   

   Comments

   1. Sep 19   08:51Posted by [report]

      I am slightly confused as to how no-one has yet questioned that investors (pensions/insurance/asset managers) rather than those naughty hedge funds were involved with selling. are they not allowed to sell?? Are they not allowed to see a price fall 50% in 2 days and think 'that's not a good investment, my policy holders will kill me for having that on the book ,I'll sell it'?? And when they are off -loading and every other player is in the same situation, prices gap down. Hedge funds are big they have influence, but they are drops in the ocean compared to the long-only industry.

   2.    8:48Posted by pitbull [report]

      Anyone hear Howard Davies interview? Forget where. How they should concentrate on fighting the fires rather than moving the goalposts? I can’t wait to see the unintended consequences of the latest ban.

   3.    8:46Posted by pitbull [report]

      Don’t let me anywhere near Darling or Brown!

   4.    8:46Posted by hdf [report]

      Release the hounds!!!!!

   5.    8:45Posted by hdf [report]

      I guess G Cox is trying to say that in the current market, you didnt need huge volumes to push the price down. Even though there was only less than 3% of the stock on borrow that was easily enough to do the damage.
      However, this totally ignores Pitbull’s valid point that share price only reflected the actual situation: lack of short and medium term funding.
      P.S. How are those sovereign wealth funds feeling now?!?!