Monday, 23 June 2008

HBOS car-crash

We have written a few times on the credit crunch impact on the UK financial services industry.

Nick wrote an excellent piece here on how slow the effects can be to feed through into the system. I contributed with a couple of posts a few months ago on the weakness of HBOS in particular. Even IPM picked up on this.

So today's revelation that Hedge Funds have some quite large short positions in the stock is no news really. However the impact is huge. Just last week another bad trading update has seen the shares slide to well below the Rights Issue price. This means it is quite likely there will be a poor take-up. In turn this means the underwriters will have to sell the shares in the market.

HBOS will get the money but the underwriters will potentially lose. Now seeing as they always make money on these deals, effectively for nothing, then this does not cause me (or others) to well up with tears.

However, it does mean more losses for the sector as a whole and the possibility of another big drop in the share price of HBOS. Where will the bottom be? Who knows, but it will leave HBOS very exposed to take-over or worse in future months.

Many journalists and financial players are bored with the credit crisis and are calling a bottom because they want a new angle and a new story or more profits. I think this episode highlights how far we are from that being the case.

NB A further point to make is that the FSA can't even get enough evidence to prove insider trading when it is obvious to everyone what happened; a bad state of affairs. I am never keen on extra regulation - but without it markets cannot operate efficiently. I am glad the FSA made the Hedgies expose their positions, a false start maybe, but signs that at least they are trying something to help investors understand the full picture.


Anonymous said...

HBOS could be the last of the big bank rights issues. If the share price goes below the rights issue price and the underwriters are left holding some equity, then in the future, underwriters will be very reluctant to take up this kind of business.

Mark Wadsworth said...

Ta for link, I'm glad to see HBOS were underwater again recently.

Alice, if a bank does a deep-deep discounted rights issue, let's say at ten per cent of current share price, then underwriters can continue making the easy money to which they have become accustomed. HBOS' mistake (from the underwriters' point of view, at least!) was doing rights issue at two-thirds of current share price.

Mark Wadsworth said...

Anyway, what's the big difference between stock-lending/short selling and contracts for differences and a straight bet on IG Index?

The FSA will always be lumbering behind the times on this, no way can they outlaw short-selling, there's always a way of structuring a contract so that it falls outside the rules. e.g. I could write a call option and buy a put option, that comes to the same thing as short-selling (I think).

CityUnslicker said...

Alice - Well yes, although barclays is next in line when they make up their mind what to do. HBOS is not helped by the fact they are entirely exposed to the UK property market with nothing else in their business worth mentioning

CityUnslicker said...

Mark - They were greedy - also discounting the rights so heavily would be an admission of how bad things had become.

On spread betting there is a big difference. I don't mind people gambling all they like; their choice if they want to enrich Mr Wheeler.

Much different for companies whom dividends pay out our pensioners; playing pure gambling games with them - and fixing the market - is destructive to our society.

I agree the FSA is lumbering; but better that than doing nothing.

Anonymous said...

Has the time come for account holders to start to run?

CityUnslicker said...

Yokel - No, Alistair Darling has guaranteed all deposits up to £35,000.

monoi said...

Are you saying that without the hedge funds selling (short or not) the share price would be higher ?

In what way are they fixing the market ?

CityUnslicker said...

Welcome Monoi - There are two points that I am making. One is that HBOS is screwed becuase of what will be an in effect failed rights issue.

Secondly that the FSA is right to investigate insider trading and the links the shorting which were clearly in play in the HBOS share price back in March.

As for what the price would be without shorting that is a very hard question to answer; but the numbers add up to 5% of the shares being held in short positions - so there will be some effect, it is just technically impossible to calculate due to lack of information.

Anonymous said...

The word 'discount' is very misleading in this context, although everyone seems to be using it.

The new shares are being offered to existing shareholders at a 'price' of £x. But they already own the rights, which have a value of £y. The true cost of a new share is £(x+y), which makes up the total market price of the new, diluted shares. There is no 'discount'.

The problem comes when the company sets the value of x too high, in which case no-one is going to pay £x for new shares when their market value has dropped below it.

Anonymous said...

aaaa片, 免費聊天, 咆哮小老鼠影片分享區, 金瓶梅影片, av女優王國, 78論壇, 女同聊天室, 熟女貼圖, 1069壞朋友論壇gay, 淫蕩少女總部, 日本情色派, 平水相逢, 黑澀會美眉無名, 網路小說免費看, 999東洋成人, 免費視訊聊天, 情色電影分享區, 9k躺伯虎聊天室, 傑克論壇, 日本女星杉本彩寫真, 自拍電影免費下載, a片論壇, 情色短片試看, 素人自拍寫真, 免費成人影音, 彩虹自拍, 小魔女貼影片, 自拍裸體寫真, 禿頭俱樂部, 環球av影音城, 學生色情聊天室, 視訊美女, 辣妹情色圖, 性感卡通美女圖片, 影音, 情色照片 做愛, hilive tv , 忘年之交聊天室, 制服美女, 性感辣妹, ut 女同聊天室, 淫蕩自拍, 處女貼圖貼片區, 聊天ukiss tw, 亞亞成人館, 777成人, 秋瓷炫裸體寫真, 淫蕩天使貼圖, 十八禁成人影音, 禁地論壇, 洪爺淫蕩自拍, 秘書自拍圖片,

做愛的漫畫圖片, 情色電影分享區, 做愛ㄉ影片, 丁字褲美女寫真, 色美眉, 自拍俱樂部首頁, 日本偷自拍圖片, 色情做愛影片, 情色貼圖區, 八國聯軍情色網, 免費線上a片, 淫蕩女孩自拍, 美國a片, 都都成人站, 色情自拍, 本土自拍照片, 熊貓貼圖區, 色情影片, 5278影片網, 脫星寫真圖片, 粉喵聊天室, 金瓶梅18, sex888影片分享區, 1007視訊, 雙贏論壇, 爆爆爽a片免費看, 天堂私服論壇, 情色電影下載, 成人短片, 麗的線上情色小遊戲, 情色動畫免費下載, 日本女優, 小說論壇, 777成人區, showlive影音聊天網, 聊天室尋夢園, 義大利女星寫真集, 韓國a片, 熟女人妻援交, 0204成人, 性感內衣模特兒, 影片, 情色卡通, 85cc免費影城85cc, 本土自拍照片, 成人漫畫區, 18禁, 情人節阿性,

Anonymous said...

情色電影, aio交友愛情館, 言情小說, 愛情小說, 色情A片, 情色論壇, 色情影片, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊美女, 視訊交友, ut聊天室, 視訊聊天, 免費視訊聊天室, a片下載, av片, A漫, av dvd, av成人網, 聊天室, 成人論壇, 本土自拍, 自拍, A片, 愛情公寓, 情色, 舊情人, 情色貼圖, 情色文學, 情色交友, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 色情遊戲, 情色視訊, 情色電影, aio交友愛情館, 色情a片, 一夜情, 辣妹視訊, 視訊聊天室, 免費視訊聊天, 免費視訊, 視訊, 視訊美女, 美女視訊, 視訊交友, 視訊聊天, 免費視訊聊天室, 情人視訊網, 影音視訊聊天室, 視訊交友90739, 成人影片, 成人交友,

免費A片, 本土自拍, AV女優, 美女視訊, 情色交友, 免費AV, 色情網站, 辣妹視訊, 美女交友, 色情影片, 成人影片, 成人網站, A片,H漫, 18成人, 成人圖片, 成人漫畫, 情色網, 日本A片, 免費A片下載, 性愛, 成人交友, 嘟嘟成人網, 成人電影, 成人, 成人貼圖, 成人小說, 成人文章, 成人圖片區, 免費成人影片, 成人遊戲, 微風成人, 愛情公寓, 情色, 情色貼圖, 情色文學, 做愛, 色情聊天室, 色情小說, 一葉情貼圖片區, 情色小說, 色情, 寄情築園小遊戲, 色情遊戲, 情色視訊,