Not all traders feeding off of Galleon’s wind down are making wise moves. Today squawk-boxes on tech desk were buzzing about the movement of $AERG, Applied Energetics. A penny stock position Galleon held 7.5 million shares in at the end of the second quarter.
“The stock fell on the first news of Galleon troubles and today it was doing its reversal off the news of Galleon’s portfolio liquidation,” says CNBC contributor Paul Kedrosky.
When a hedge fund like Galleon is thought to be forced into selling off stocks to pay back upset investors dying to get out, the street will immediately try to figure out the firm’s current positions and then short the heck out of those stocks. The trick is you need an inside line, hopefully a friendly tip from the funds broker dealer or someone inside the firm to confirm what the heck they really hold. If you don’t have one of those special lines then a short seller will look at whatever is listed in the funds last SEC filing known as a 13-F.
Now hear is why some traders were laughing about other vulture like traders getting burned on $AERG today.
“Because smarter money went short initially, the stock fell and they quickly took profits. Naive short sellers piled in late, and so market-makers and hedgies slipped in a few trades, force a short-covering rally and blow up the naive short-sellers,” says the author of Infectious Greed Paul Kedrosky.
The stock rose 20 percent at its peak today.
“The best part, of course, is that no one has any idea if Galleon even still owns AERG given this speculative fun comes from the 6/30/09 13-F filing,” says Kedrosky
Which leads us to another question– what kind of fundamental analysis was Galleon really doing to get into a tech stock that never has traded above a $1?
Tim Connolly of Sconset Capital told Dealbreaker, “A while back SAC Capital mentioned they had a position in the stock. Galleon likely piggy backed on SAC being in the trade instead of doing fundamental research before they loaded up on $AERG.”
Jon Najarion, of Optionmonster.com, told Dealbreaker the only thing he’s seen are rumors of Galleon liquidating their stocks and that’s acting as a catalyst for folks to get short what they thought Gallon was selling. “So now the naïve traders are taking the pipe big time. For the most part the smart money bought as the dumb money sold,” says Najarion.
First, bitches.
Not for nothing, Teri brought a nice little nugget to our attention & she’s speaking our language.
What language is that, the language of retards? Total exchange volume of AERG since the arrests has been 815,000 shares, that’s a dollar volume of 0.4 MM. wow, that’s some hot hedge fund action. Get back to the middle office and STFU so we can get some work done.
Volume in one Galleon held stock is irrelevant to the piece – I think her point is speaking to other stocks we all know some guys are trying to foolishly short off of hopes Galleon has to sell distressed. Could work if you know their positions but could also fail if you’re guessing.
I thought Connolly’s quote was classic and so true.
That was just one the names they owned back in June. Lots of other little PoS in their portfolio. We looked at their positions over the past 4 years and dagnabbit if they had more losers than winners. Tough market.
If they still own EBAY they have a bunch more hurt coming tomorrow. But maybe they don’t as the liquid names are the ones they prob jettisoned in the last few.
Hmm, this stock’s going down. I think Galleon’s liquidating. Yes I think it’s Galleon all right. I’ll bet it is.
Teri – I’m very surprised by this weak post after all the great work you’ve done on Galleon. Nobody cares about penny stocks except Yahoo message board trolls. 20% in this stock is a whopping 8 cents. As an earlier commenter pointed out the volume was 815k shares, that is $65k in PnL. No “hedgie” would take notice of that and neither should you. Also hear != here.
@6
Shush child. See @ 3 for why you’re an idiot. Teri does a good job getting unique stories, so if you don’t like it, stay in the DB peanut gallery where you belong.
Anyone else remember HRY – Hallwood Realty? Some fund was in liquidation and more than a few guys were betting against this very illiquid stock/jammed fund. Ichan was brought in to buy HRY in the end. Needless to say, it was not a fun time for the shorts.
@8 Interesting on HRY/Ichan. Thanks for bringing that up. Shows you really need good inside info if your are going to win at the bloodsucking game of making money off fellow traders demise.
@7
If Teri’s point was in line w/ 3′s comment there should be a better example than an illiquid penny stock that has an immaterial impact on anyone’s PnL. Also, I clearly stated I liked Teri’s previous reporting on Galleon. I notice you don’t refute anything in my post so I will infer you are a simpleton who is easily distracted by sensationalist stories. I suggest you move over to the Yahoo boards and tune into Fast Money.
-6
@9
HRY had already declined by 30+%, it was well below NAV and any DCF would have placed the firm well above the $100 mark. Ichan took it out at around $120 I think. It was an interesting resolution to complex problem, not insider dealing. It was simply intended to support the central idea of the piece that some can go overboard when they feel they have another trader on the ropes. That is, unless your name is Paul Touradji.
Well it looks like Business Insider thought this was a worth while story also becuase they just followed it and they have something like 2m readers.
http://www.businessinsider.com/shorts-slaughtered-to-front-run-galleon-2009-10
Nice work Dealbreaker.