Global Marine Energy Share Discussion Threads

[spob] 28/1/2021 01:34

Hedge funds feel the heat as Pearson catches day-trader fever

Bearish bets unwound as US exuberance crosses the Atlantic


Bryce Elder

Lombard

Financial Times

27 January 2021




It is a measure of dysfunctional markets that day traders delivered a bigger return for Pearson shareholders within 90 minutes than John Fallon ever managed in seven years as chief executive.

An early morning pile-on lifted shares of the textbook publisher by nearly 20 per cent to their highest since July 2019. Had the long-rumoured private equity bid approach finally arrived? It appears not. Instead, Pearson was one of a handful of companies to catch the secondary effects of stonk-mania, the US-led fashion among retail investors for using collective brute force to soak up liquidity and pressure short-sellers into closing their bets.

Cineworld and Petrofac caught the same bug, as did J Sainsbury. A cinema chain, a refinery engineer and a grocer have little in common other than being among the most heavily shorted stocks on the London market, with Financial Conduct Authority data showing 8 per cent or more of their total share capital out on loan.

It is too easy, however, to write off these moves as a direct consequence of investment gamification via internet message boards and commission-free trading apps. Stock markets remain a niche pursuit for Britons, who have free access to many other forms of legal gambling, and the social media chatter on Wednesday gives no hint of a cross-border mob assembling that would have the heft to move FTSE 100 stocks. Yet more than 6m Pearson shares changed hands within the first three hours, about treble the daily average.

Instead, events on Wall Street appear to have triggered a broad and undifferentiated risk-off trade among hedge funds. Very few will have direct exposure to the likes of GameStop, a flagship investment for the day trader armies. But after Melvin Capital Management required a bailout for being on the wrong side of the GameStop trade, fellow hedge funds are facing higher borrowing costs and more constraining volatility metrics.

Do not expect much sympathy for the short-sellers. They make convenient villains, particularly on the internet forums that set the current mood. Yet in a market powered largely by algorithms and technical signals, the bears play a valuable role in improving corporate transparency and accountability. Financial incentives have helped expose numerous frauds, from Enron and Wirecard to NMC Health, as well as putting pressure on countless other companies to clean up their operations.

It is hard to know exactly how much credit to give the amateur trader armies for each day’s gyrations. Nevertheless, their involvement is making life more difficult for the investor class working hardest to keep markets honest, which is an unfortunate unintended consequence.

[spob] 28/1/2021 01:19

‘Weaponised’ options trading turbocharges GameStop’s dizzying rally

[spob] 28/1/2021 01:05

‘Short squeeze’ spreads as day traders hunt next GameStop


White House is ‘monitoring the situation’ after surge in targeted stocks on both sides of the Atlantic

European companies targeted by Reddit traders include Poland’s CD Projekt, maker of the Witcher series of video games, the pharmaceuticals group Evotec and the battery maker Varta


Robert Smith, Laurence Fletcher and Madison Darbyshire in London and Eric Platt in New York




Financial Times

27 January 2021



A “short squeeze” that started on Wall Street swept across the globe on Wednesday, triggering another day of frenetic moves in the share prices of companies with large bets levied against them.

The White House press secretary Jen Psaki said the Biden administration was “monitoring the situation” as shares of companies including GameStop, the hard-hit cinema owner AMC and BlackBerry surged in a volatile day of trading.

The dramatic moves highlight the growing influence of retail traders, who have organised on the message board site Reddit. The group has focused on pushing up stocks that are the subject of large short bets by hedge funds. Their success in rallying the stock price of GameStop has vindicated a group now targeting companies on both sides of the Atlantic.

Stocks such as US home goods retailer Bed Bath & Beyond, Finnish telecoms group Nokia, German pharmaceuticals company Evotec, former Financial Times owner Pearson and Polish games developer CD Projekt rose sharply in intraday trading.

Shares in AMC, which earlier this week clinched a rescue financing, rose 301 per cent on Wednesday, while the retailer Express more than tripled in value. GameStop, which has been at the centre of the retail trading bonanza, shot up 135 per cent.

We are recently detecting some European stocks being touted as 'the next GameStop’ among retail investors

Ivan Cosovic, Breakout Point

The gains stood in stark contrast to a broad market decline triggered by concerns about the rollout of vaccines and pandemic risks to the economy. The US S&P 500 index and tech-heavy Nasdaq Composite both slid 2.6 per cent.

“It’s like a wolf pack seeking out the weakest member of the herd,” said Steve Sosnick, chief strategist for Interactive Brokers.

The flash rallies prompted TD Ameritrade to put trading restrictions in place for several securities, including GameStop and AMC. The company said the limits could include restricting short sales or requiring 100 per cent margin for certain trades, moves it said would mitigate risks for itself and its clients.

“We made these decisions out of an abundance of caution amid unprecedented market conditions and other factors,” the brokerage said.

The Securities and Exchange Commission on Wednesday said it was aware of the volatility across equity and options markets and it was “working with our fellow regulators to assess the situation and review the activities of regulated entities, financial intermediaries, and other market participants”.

William Galvin, the Massachusetts secretary of the commonwealth who last month sued the trading platform Robinhood for “gamifying” investing and failing to protect its users, said trading in GameStop should be halted. “At the present time, the best action is to prevent this from being traded,” he told the Financial Times. (Robinhood has denied the allegations in the complaint from the Massachusetts securities division.)

Some of the companies whose shares surged were targets of Melvin Capital, a hedge fund that has been singled out by day traders. Those included Evotec, which was up 9.6 per cent; CD Projekt, which rose 5.3 per cent; and the German battery manufacturer Varta, which rose 12 per cent before trimming its gains to trade up 6.2 per cent.

Melvin on Wednesday revealed it had closed its GameStop position, having sustained a multibillion-dollar loss on its shorts since the start of this year.

Retail investors are using “a tried-and-true hedge fund strategy of swarming crowded trades held by weak-handed investors”, said Andrew Beer, managing member at fund firm Dynamic Beta Investments.

In contrast to the US, which has limited disclosure on short bets, hedge funds and other investors have to disclose when they have shorted more than 0.5 per cent of a company’s stock in the EU and the UK, making it easier to target a fund’s positions.

Melvin’s latest disclosure shows it has bet against more than 6 per cent of Evotec’s shares, making it the largest single wager against a European company by percentage of shares shorted, according to the data provider Breakout Point. The US hedge fund’s bet against Varta is the fifth largest.

The “short squeeze phenomenon fuelled by retail investors’ discussions is spilling over to Europe”, said Ivan Cosovic, founder of Breakout Point. “We are recently detecting some European stocks being touted as ‘the next GameStop’ among retail investors.”

The targeting of hedge funds will be viewed with irony by many financial market insiders, given that such funds are often the protagonists in short-selling attacks on troubled companies.

Heavily shorted shares with no link to Melvin also rose on Wednesday. Shares in Pearson, the British education publishing company that is the third-most shorted stock in Europe, according to IHS Markit, climbed 14 per cent to close at its highest level in 16 months. Daniel Sundheim’s New York-based hedge fund D1 Capital Partners, which has also been shorting Varta, has the biggest bet against Pearson, at 3.8 per cent of its share capital.

The real estate company Wereldhave, in which Woodson Capital has disclosed a 4.2 per cent short position and London-based Adelphi has a 3.6 per cent bet, rose about 5 per cent.

Hedge funds in Europe are now fervently scouring lists of most-shorted stocks and message boards such as Reddit for any signs that their short bets could be in trouble.

“Any good hedge fund group will be looking at this,” said the head of one multibillion-dollar European hedge fund group.

One European hedge fund manager who specialises in short selling described the recent stock market rallies as “insane”, but said the elevated share prices of troubled companies would “make a great opportunity” for short sellers that survived the week’s mayhem.

Additional reporting by Patrick Temple-West

[spob] 27/1/2021 22:26

How GameStop found itself at the center of a groundbreaking battle between Wall Street and small investors

The video game retailer has become one of the hottest stocks this year in a tale that illustrates the changing face of investing


Edward Helmore in New York

Wed 27 Jan 2021

The Guardian


The coronavirus pandemic hit GameStop hard. Like many retailers, already suffering from the shift to online sales, the video games chain is losing money and plans to close 450 stores this year. And yet, surprisingly, GameStop has become one the hottest stocks of the year.

The 37-year-old chain store group is now the focus of a David-and-Goliath battle between an army of small investors and Wall Street that shows no signs of abating and has highlighted some fundamental shifts in investing.

Last April, when the company announced mass closures, GameStop’s shares (GME) could be bought for $3.25 each. On Tuesday they soared another 92% to end the day at close to $148, pumped up again by small investors hoping to ruin Wall Street bets that the price would crash. It’s a bet that has, so far, proved very costly for the professional financiers.

The strange saga of GameStop’s cult status can be traced back to last September, when Ryan Cohen – investor and founder of the online pet food giant Chewy – took a 13% stake in the retailer and started lobbying for it to move more of its business online and become a serious rival to Amazon. Cohen and two associates were added to the company’s board in January.

The company’s share price began to soar as small investors snapped up a cheap stock using the trading app Robinhood and other services, seizing on what they saw as an ideal buying opportunity. Wall Street saw something else – a chance to “short” an ambitious bet against Amazon they believed was bound to fail.

Shorting a stock is risky. It involves “borrowingR21; a company’s shares and selling them with the intention of buying them back cheaper when the share price falls. Many Wall Street fortunes have been made this way, but if the price doesn’t fall, the losses can be huge.

About 71.66m GameStop shares are currently shorted – worth about $4.66bn. Year-to-date, those bets have cost investors about $6.12bn, which includes a loss of $2.79bn on Monday.

Monday’s stock gain of 145% in less than two hours, which extends GameStop’s gains for the year to more than 300%, is the latest sign that frenetic trading by individual investors is leading to outsize stock-market swings. On Tuesday, the party continued. When, and how, it ends is anyone’s guess.

GameStop has been the most actively traded stock by customers of Fidelity Investments in recent sessions, with buy orders outnumbering sell orders by more than four to one. The volatility prompted the New York stock exchange to briefly halt trading nine times.

“We broke it. We broke GME [GameStop’s stock market ticker] at open,” one Reddit user wrote on Monday after the NYSE halted trading.

Ihor Dusaniwsky, a managing director at the data analytics company S3 Partners, called the situation “unique”. Established investors were still betting that the company’s sky-high share price would – eventually – collapse, ignoring earlier losses “and using any stock borrows that become available to initiate new short positions in hopes of an eventual pullback from this stratospheric stock price move,” he said.

“Much like the revolutionary war, the first line of troops goes down in a rain of musket fire but is replaced by the troops next in line,” Dusaniwsky added.

The battle has become a war of attrition between a new generation of investors and established, more diversified players.

Investors on the WallStreetBets subreddit forum have been promoting GameStop aggressively, with many pitching it as a battle of regular people versus hedge funds and big Wall Street firms.

“This is quite the experience for my first month in the stock market. Holding till infinity,” posted one user on the thread. Another user said: “We’re literally more powerful than the big firms right now.”

In some cases, they’ve been right, with larger investors like Citron Research taking a sharp lesson in what can happen when “herd investors” squeeze a stock higher.

Citron’s founder, Andrew Left, called GameStop a “failing mall-based retailer” in a report earlier this month and then predicted that the stock would plunge to $20 in a video he posted to Twitter on Thursday.

According to CNN, Left has now given up on shorting the stock, citing harassment by the stock’s backers.
‘We broke it. We broke GME at open,’ one Reddit user wrote on Monday after the New York stock exchange halted trading. Photograph: Richard Drew/AP

Another loser is Melvin Capital Management, a hedge fund that has lost 30% of $12.5bn under management this year on a series of short positions, including exposure to GME. On Monday, Citadel LLC and its partners announced it would invest $2bn in Melvin, and Point72 Asset Management (the New York Mets owner Steve Cohen’s firm) would invest an additional $750m on top of $1bn already in the fund.

“As someone who started trading stocks in the late 90s in college, I would always remember watching when the small retail trading groups would get crushed by hedge funds and savvy short-sellers,”; Oanda market analyst Edward Moya said in a report. “What happened with GameStop’s stock is a reminder of how times are changing.”

The battle has spread further, with some accusing the financial media of backing institutional Wall Street players. In an open letter to CNBC, one Reddit user wrote: “Your contempt for the retail investor (your audience) is palpable and if you don’t get it together, you’ll lose an entire new generation of investors.”

But others warned that conditions represent market intoxication. “This is the new day and age in which no one listens to the analysts: ‘Why bother, let’s just go out and buy it ourselves?’221; Lars Skovgaard Andersen, investment strategist at Danske Bank Wealth Management, told the Wall Street Journal. “It is a sign of high complacency.”

The short-squeeze war over GameStop stock is just the latest in a series of conflicts perhaps exemplified by the war over Tesla stock. Last year, short-sellers of the electric vehicle maker lost $38bn, which S3’s Dusaniwsky called “the largest yearly mark-to-market loss I have ever seen”.

It is too early to say how long the GameStop saga will continue, or how it will end, but some analysts believe both sides in this skirmish could learn some hard lessons.

“I think the millennials will temporarily be rewarded, and a short-squeeze is definitely conceivable,” the investor Erika Safran at Safran Wealth Advisors said. “The stock can get pushed up so that at some point the short-sellers will fold and make the stock go higher. Eventually, it may trend down to the fundamentals of what a stock like this is willing to accept.”

Safran has in the past warned that Robinhood, the vehicle many long-investors are using to make trades in GameStop, is behind investment strategies that financial planners generally warn against.

“It’s ironic to me and other professional advisers that over decades we have moved away from an individual stock-picking philosophy to broad stock diversification, and this is the exact opposite,” Safran says. “Investing is not just buying one stock.”

Safran says the strategy of driving up a stock in the hope of forcing a short-squeeze and riding an a individual stock are hallmarks of a conflict between the new, individual investment strategy and the old guard that recognized financial success requires diversification.

“Someone’;s got to be wrong, but that’s what makes a market,” Safran says. “I think it will be an education for some and a good story for everyone else.”

[solarno lopez] 08/2/2010 13:39

what happened to BRENDAN LARKIN

[solarno lopez] 08/2/2010 13:38

is BRENDAN LARKIN still around

[the_owl] 12/5/2008 19:09

...The Owl has left the building.
Happy hunting.

[magrew] 08/5/2008 09:24

Goodbye and thanks for all the fishes!

[murtceps7] 14/4/2008 17:14

Pomp, I was told by Barclay's last month that the money wouldn't be available until at least the 1st May. thats why i bailed out.
Good luck in your future investments anyway :-)all water under the old bridge now !

[pomp circumstance] 14/4/2008 08:37

Why did you sell out? The money is in the bank. I received mine on friday.
The management had no say over the last few months, it was a done deal.
With the lot i bought back in October at around the 7p and the loads i bought at 13p after they offered 16p, i have all but coverd my previous losses.
Shame they screwed it up tho, Im not sure they always had control of what got screwed up, but another set of names to go on the directors black list!

[murtceps7] 14/4/2008 07:36

Thats the AIM for you. The chances of finding a legit management working for its investors is slim.
This lot got away with murder and at our expense !! its a shame there is no regulatory body to watch and act on companies like this.
I have sold out at 15.5 over the last few weeks because i wouldnt put it past this crowd to do something stupid even now !

[davidsheila1] 19/3/2008 11:57

EMER says to hold EGM on March 17 for approval to buy Global Marine Energy




LONDON (Thomson Financial) - TSC Offshore Group Ltd, formerly EMER
International Group Ltd, said it plans to convene an EGM on March 17 to secure
shareholder approval for its Global Marine Energy PLC (GME) offer.
The company said the offer will be open for acceptance until March 21.
On Nov 6, 2007, EMER upped its reverse takeover offer for GME to 16 pence a
share from earlier 13 pence a share.
Hong Kong-listed EMER, a product and service provider to the global oil and
gas drilling industry, said it plans to fund the deal through its existing cash
resources.
[e-mail]
rda/slm

[murtceps7] 18/3/2008 20:03

hvs lives in a sad little world of his own and is hated on most boards. His loses keep piling up and still he thinks people give a toss what he thinks...lol

[pbracken] 18/3/2008 08:05

It gives me great pleasure to inform readers of this BB that in the past 12 months GME has massively outperformed two shares treasured by dear old hvs: GFRD (down 70%) and BTG (down 50%). GME, meanwhile, is down only 15%.

Those losses couldn't have happened to a nicer guy.

[hvs] 17/3/2008 19:27

I smell a RAT here.

[murtceps7] 17/3/2008 16:55

If these were not pegged at 16p with the markets as they are i think we would have been looking at 8p or less now.

[elephants drunk] 17/3/2008 16:39

On Oct 19 2007, EMER had agreed a 13 pence per share reverse takeover offer for GME, valuing the latter's fully-diluted share capital at around 9.4 mln stg.



note "fully diluted"