Archive for September 2008
I know we work up a lot of righteous indignation on behalf of the short selling community over the ass backwardness that is the ban. All of it it warranted– especially that which is thrown at people like the proprietors of GLG and Man Group– but this might actually be the last time we act as a proxy for the particular injustice that is the Long Only Suction. Because it will probably be difficult if not impossible to top the richness of this latest episode. AMB Property (an Industrial REIT) was not one of the original Lucky 799. Since the barrier to entry was non-existent, the company requested it be added to the list last Monday. Then on Wednesday, it oh so coincidentally decided to slash earnings guidance for the remainder of the year (which, we’re told, they did on a property tour in Europe that unless you were on or listening in on the internet probably didn’t notice). And on Friday night, AMB proclaimed with flourish that they wanted off the list because, they told The REIT Newshound,* “It didn’t feel right. We believe we’re a good company and if someone wants to short us that’s okay.”
*Which is apparently “The Page Six of the REIT world.”
At least if the Wall Street Journal is to be believed, the short sale ban will be extended for at least a week or two after the original October 2nd sunset date. Doubtless the incredible success of the plan (see attached chart after the jump), put into place on September 19th, and its immense popularity with market participants are the central influences spurring its renewal. Said the SEC at the time:
Under normal market conditions, short selling contributes to price efficiency and adds liquidity to the markets. At present, it appears that unbridled short selling is contributing to the recent, sudden price declines in the securities of financial institutions unrelated to true price valuation. Financial institutions are particularly vulnerable to this crisis of confidence and panic selling because they depend on the confidence of their trading counterparties in the conduct of their core business.
As we pointed out earlier today, Taiwan got in on the act and banned short selling outright. I don’t know about the rest of you, but I am really enjoying my new found equilibrium based on the “true price valuation” of high leveraged financial institutions that feel no downward price pressure except that of their own bloated balance sheets.
Don’t Blame Short Selling [Wall Street Journal]
Related: DealBreaker Swag
As you know, the Securities and Exchange Commission came out with some news today. We consulted an expert on the matter, and he suggested that Cox and Co. take things one step further. And when you think about it, it’s really not that giant a leap from one to the next. His thoughts are after the jump.
A review of “fair value” accounting promises to be a long, painful procedure that not only carries with it the possibility of severe and potentially deadly infection, but entails a long recovery time and is likely to reveal any number of other tumors and growths that threaten to be a bigger deal than the original concern.
Accounting pathologists that we are, our attention has been rapt.
Take a seat in the visitors observation lounge. We’re going in.
Press Release (plus Q&A!) from Coxville:
FOR IMMEDIATE RELEASE 2008-234
Washington, D.C., Sept. 30, 2008 — The current environment has made questions surrounding the determination of fair value particularly challenging for preparers, auditors, and users of financial information. The SEC’s Office of the Chief Accountant and the staff of the FASB have been engaged in extensive consultations with participants in the capital markets, including investors, preparers, and auditors, on the application of fair value measurements in the current market environment.
There are a number of practice issues where there is a need for immediate additional guidance. The SEC’s Office of the Chief Accountant recognizes and supports the productive efforts of the FASB and the IASB on these issues, including the IASB Expert Advisory Panel’s Sept. 16, 2008 draft document, the work of the FASB’s Valuation Resource Group, and the IASB’s upcoming meeting on the credit crisis. To provide additional guidance on these and other issues surrounding fair value measurements, the FASB is preparing to propose additional interpretative guidance on fair value measurement under U.S. GAAP later this week.
While the FASB is preparing to provide additional interpretative guidance, SEC staff and FASB staff are seeking to assist preparers and auditors by providing immediate clarifications. The clarifications SEC staff and FASB staff are jointly providing today, based on the fair value measurement guidance in FASB Statement No. 157, Fair Value Measurements (Statement 157), are intended to help preparers, auditors, and investors address fair value measurement questions that have been cited as most urgent in the current environment.
Bloomberg reports that the Swiss bank is going to eliminate 1900 employees in investment banking, equities and fixed income. They’re also planning on announcing a $2.7 billion write-down, probably tomorrow.