From a BNB post today - could the same situation have run the BBP price up from 6c odd to current price??
"Forget the 1980s. That was just a warm-up for the main act. These are the dying days of the real decade of greed. And there is no greater example than in the recent trading in Babcock & Brown shares.
The past couple of days has seen some wild gyrations in the share price of a company that clearly has no future. Even John Cleese at his Monty Pythonesque best would have difficulty arguing that it was just resting or "pining for the fiords".
This is a dead company, gone to meet its maker. So who in their right mind would bother buying shares in a company that was a dead cert to collapse? And particularly on the very day the corporation announced it had "negative net assets"?
The answer? A hedge fund that finally was calling in a short selling position. A what position, I hear you ask.
About a year ago, an unnamed international hedge fund sold shares in Babcock & Brown around the $18 mark. In fact, it sold about $400 million worth of Babcock & Brown shares. That's right, it banked $400 million.
The slight technical hitch is that it didn't actually own the shares it sold. Instead, it borrowed them, presumably from some dumb insurance company or superannuation fund for a nominal fee.
This week, that very same hedge fund figured it would maximise its gain by closing out its position. That means it had to buy them back. And it is that buying that has pushed up the share price.
The shares it sold for $18 - which it didn't even own - this week were bought back for an average price of 40c, delivering an enormous profit to the hedge fund. And it relieved its debt by delivering back those shares it borrowed. Forget the fact they are almost worthless."
