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Italian Regulator Responds To Plunging Saipem Stock: Bans Shorting

Tyler Durden's picture




 

Yesterday the stock of Italian offshore oil services company Saipem SpA imploded nearly 40% after the company said it expected 2013 net profits to be, oh, just around 50% below current consensus. In other words, merely another case of irrational investor exuberance where actual corporate cash flow is orders of magnitude below where the sellside expected it to be, and so indicative of what happens every time hopium collides with reality (and, tangentially, is the real valuation case for most public stocks were they to report real, not GAAP-massaged earnings).

Only in this case there was a lot of hopium, because none other than Bank of America placed some 10 million share of Saipem stock at €30/share just hours ahead of the news release that sent the stock crashing! Nothing like getting a 40% wipeout minutes after naively believing the lies from the most incompetent bank of all time. "This is a disaster for the buyer of the placed shares and it is a disaster for Bank of America Merrill Lynch," one trader said. As Dow Jones reports, "Several traders said Tuesday's buyers, who face huge losses, are likely to push to revoke the deal, and that Bank of America will ask the seller if they had insider knowledge of the imminent news."

But borderline criminal incompetence on the side of BofA is nothing new. Where this story gets really surreal is the response of the Italian regulato Consob, which this morning did the only thing it could do: it banned all shorting of the stock.

From Consob google translated:

Resolution no. 18454

 

Temporary ban on short selling of shares issued by Saipem SpA, pursuant to Article 23 of the EU Regulation. 236/2012 of the European Parliament and of the Council of 14 March 2012

 

THE NATIONAL COMMISSION FOR THE COMPANY 'AND BAG

Seen the Law of 7 June 1974, n. 216, and subsequent amendments and additions;

 

HAVING REGARD to the EU Regulation. 236/2012 of the European Parliament and of the Council of 14 March 2012;

 

Having regard to Article 4-bis, paragraph 2, of Legislative Decree no. 58 of 24 February 1998, according to which Consob is responsible for implementing the measures and to exercise the functions and powers under the EU Regulation. 236/2012 of the European Parliament and of the Council of 14 March 2012 with reference to, among other things, to equities;

 

Having regard to Article 12 of the EU Regulation. 236/2012 of the European Parliament and of the Council of 14 March 2012, which imposes certain restrictions on short sales of equity securities in the absence of availability of the securities;

 

Having regard to Article 23 of the EU Regulation. 236/2012, which sets the power to take temporary restrictions on short sales of securities in the event of a significant fall in the price;

 

WHEREAS the relevant threshold in the case of the Saipem is equal to 10%;

 

WHEREAS, the change in price of Saipem compared to the end of the previous day was equal to -34.3%;

 

ACKNOWLEDGED that the information environment is not fully justify the above price change and, therefore, can not be excluded bearish speculation;

 

RESOLVES:

 

1. The ban on short selling of Saipem shares (ISIN code: IT0000068525) MTA on the regulated market organized and managed by Borsa Italian SpA, pursuant to article 23 of the said Regulation, as of 0.00 and up to 24:00 on 31 January 2013. You specify, in accordance with Article 23, paragraph 3, that the prohibition does not apply to the activity of market making , as defined in Article 2, paragraph 1, letter k, of the Regulations.

 

This resolution is transmitted to ESMA and published on the website internet Consob.

 

Rome, 30 January 2013

Because, you see, it is bearish speculation that drives a stock down from €30 to €20 when the company admits its profitability was exaggerated by some 100%. People's idiocy to push it up there in the first place, with the complicit help of the same banks that lied and caused massive losses to shareholders by selling them "40%-off" stock, had nothing to do with it.

It was "bearish speculation."

But at least we now know what will happen in markets around the world, and soon in the US, when one after another myth-based upside cases for public company after public company start crashing into the iceberg of cold, hard reality, where one can only expand multiples so much before the underlying cash flow reality shines through.

To that end, we can't wait for the daily list of stocks banned for shorting each morning, issued by the regulatory branch of Morgan Stanley, henceforth known as the SEC.

 

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Thu, 01/31/2013 - 12:37 | 3202732 fuu
fuu's picture

Bears still exist?!?

Who knew.

Thu, 01/31/2013 - 12:36 | 3202738 CPL
CPL's picture

In Italy none the less.

Thu, 01/31/2013 - 12:57 | 3202832 Stackers
Stackers's picture

How long before they ban "selling" at all ?

Thu, 01/31/2013 - 13:01 | 3202849 Stoploss
Stoploss's picture

No shit, if they want to stop the drop, banning shorts isn't the way.  Ban all selling! LOLOL!!!!

Thu, 01/31/2013 - 13:33 | 3202986 AlaricBalth
AlaricBalth's picture

You are not too far off concerning your point. For example, Oct. 27, 1997 the market dropped 554.26 points.

Big losses in the Asian markets throughout the night prompted a big sell-off in the U.S. markets. For the first time in history, trading at the New York Stock Exchange was halted mid-day after the market nosedived, triggering a "circuit breaker" that timed-out trading for 30 minutes. The 1988 circuit breaker rule was created to prevent another snowballing selling-spree such as the one on Oct. 19, 1987, when the Dow plummeted 22 percent in one day. But even after the time-out, stocks continued to fall, triggering another hour-long circuit breaker when the Dow dropped 555 points. With less than an hour left in the trading day, the market closed early. The Dow closed with a loss of 554.26 points, or 7.2 percent.

In essence, the decision was made to ban further selling in order for the markets participants to catch their breath and to stem any further losses.

Thu, 01/31/2013 - 13:47 | 3203024 smlbizman
smlbizman's picture

that "no shorting will work this time.....like they say the 98th time is the charm....

Thu, 01/31/2013 - 20:00 | 3204450 fourchan
fourchan's picture

il mercato e' non buono.

Thu, 01/31/2013 - 13:03 | 3202857 CPL
CPL's picture

I'm sure someone has that on a list of things to do somewhere.

Thu, 01/31/2013 - 13:06 | 3202872 Divided States ...
Divided States of America's picture

If you want to see the remaining bears left...go to the Circus known as Wall Street....they all being caged and tortured there.

Thu, 01/31/2013 - 12:44 | 3202778 Bananamerican
Bananamerican's picture

"Don't worry BOA. We got your back. Now GET back in that Casino and make us proud!!" -US taxpayers

Thu, 01/31/2013 - 12:53 | 3202811 DeadFred
DeadFred's picture

It's winter. We're mostly groggy from hibernation. Just wait for March. ROAR!

Thu, 01/31/2013 - 13:30 | 3202977 candyman
candyman's picture

Probably bought by one of the ML in house funds. Typical dumping grounds for unloading shit like this.

Thu, 01/31/2013 - 12:38 | 3202740 CharliePrince
CharliePrince's picture

merrill is a mini --me    goldman

Thu, 01/31/2013 - 12:36 | 3202741 PaperBear
PaperBear's picture

As long as they don't ban someone who actually owns some shares from selling those shares - or is that the next ban that is coming ?

Thu, 01/31/2013 - 12:44 | 3202764 LawsofPhysics
LawsofPhysics's picture

Yes, along with more price controls.  History is very clear on this.  Bank runs and market crashes can never happen again.  No amnimal spirits allowed, ever.

Good luck.

Thu, 01/31/2013 - 12:43 | 3202773 donsluck
donsluck's picture

Forced vestment, hmm, I like the way you think!

Thu, 01/31/2013 - 12:44 | 3202783 LawsofPhysics
LawsofPhysics's picture

It has been here for a long time.  How many different investment opportunities does someone really have in their 401k?  

Thu, 01/31/2013 - 12:39 | 3202753 ziggy59
ziggy59's picture

May as well ban noose rope too

Thu, 01/31/2013 - 12:41 | 3202757 JustPrintMoreDuh
JustPrintMoreDuh's picture

Time for a fat bonus for the top brass at BOA.

Thu, 01/31/2013 - 12:40 | 3202758 swissaustrian
swissaustrian's picture

Bullish for EUR/USD

Thu, 01/31/2013 - 12:44 | 3202762 Dr. Engali
Dr. Engali's picture

It's seems bank of America doesn't have the same access to information that squiddy has.

Thu, 01/31/2013 - 12:44 | 3202781 fonzannoon
fonzannoon's picture

We are way overdue for Bank of America to have a credit freeze so Warren can take a spill in his bathtub and fall on his speakerphone which accidentally dials the white house and ends up with him getting some more sweet preferred deals before they announce the bank is fine.

Thu, 01/31/2013 - 12:50 | 3202808 Dr. Engali
Dr. Engali's picture

I'm sure Becky will be there to scoop him up and then go onto tv singing his praises about  his latest greatest investment urging the sheeple to follow the Oracle of Omaha into BOA.

Thu, 01/31/2013 - 12:43 | 3202775 q99x2
q99x2's picture

Looks like they missed their calling on that one.

Thu, 01/31/2013 - 12:46 | 3202777 booboo
booboo's picture


thank god for shorts otherwise this bitch would picking her teeth outta the gutter.

Thu, 01/31/2013 - 12:45 | 3202787 caimen garou
caimen garou's picture

hey b of a, and then my poor meatball rolled right out the door! ha,ha,ha!

Thu, 01/31/2013 - 12:46 | 3202790 Sanksion
Sanksion's picture

Good move from the regulators, but I think they are not going far enough. Selling should be prohibited, and buying compulsory. Best way for higher value, and growth. Forward!

Thu, 01/31/2013 - 12:53 | 3202813 Al Huxley
Al Huxley's picture

I up-arrowed you, because I like the path you're on, but you have to allow some selling, otherwise nobody can buy.  But the intent is right, I proposed a solution below, but another way to do it would be to have the regulatory agency just go door-to-door with a laptop and a gun, and force the general population to buy, at whatever the current ask is.

Thu, 01/31/2013 - 18:05 | 3204122 Dr Benway
Dr Benway's picture

There has to be no selling. Companies can just issue new shares at the inflated prices. Everyone's a winner!

Thu, 01/31/2013 - 12:50 | 3202799 Al Huxley
Al Huxley's picture

Instead of banning shorting, they should go all the fucking way and ban selling at any price other than 5% above the current bid.  Make the bidders hit the ask, and then ratchet the ask up again.  That would fix the problem in no time.  These dumb fuckers, no creativity, sometimes I question their real commitment to the whole ponzi scheme.

Thu, 01/31/2013 - 12:59 | 3202843 Hedgetard55
Hedgetard55's picture

Al,

 

     Does not QE literally force the owners of US dollars and their equivalents to buy stock? Ben's proxies are buying with the QE money, and it's purchasing power comes by debasing already existing dollars.

Thu, 01/31/2013 - 13:41 | 3202998 Al Huxley
Al Huxley's picture

I would say it encourages them, but doesn't force them.  And it doesn't force them to buy any particular stock.  This scheme would let the regulators pick which stocks go up.  That way they and their friends, associates and lobbyists could position themselves appropriately in advance of the big moves with far more precision than is currently possible.

Thu, 01/31/2013 - 13:50 | 3203049 Hedgetard55
Hedgetard55's picture

My point was that when they buy, whatever they buy, it is being paid for through debasement of the dollar, thus you and I are paying, and not voluntarily.

Thu, 01/31/2013 - 13:01 | 3202851 fonzannoon
fonzannoon's picture

I guaranfuckingtee you some suit somewhere is implimenting your suggestion as we speak,

(Dave.....Hey Dave....come over here and read this, this guy has a good idea).

Thu, 01/31/2013 - 14:33 | 3203243 Matt
Matt's picture

Instead of a market, run it as an auction where the auctioneer just calls out the new Ask. That will sure solve the HFT and front-running problems.

Thu, 01/31/2013 - 12:54 | 3202823 slackrabbit
slackrabbit's picture

Speaking of manuipulation - anyone miss this?

China Local govn't are getting 3/4 of the debt rolled....

http://www.scmp.com/business/banking-finance/article/1139147/china-banks...

 

Thu, 01/31/2013 - 12:54 | 3202825 Vooter
Vooter's picture

The only reason that shorting has EVER been banned is because selling itself can't be banned. LOL...I love it...I hope people kill themselves...

Thu, 01/31/2013 - 18:10 | 3204147 Dr Benway
Dr Benway's picture

I would say the reason is that regulators are morons. Any time a stock crashes, the money has been stolen long before, when the dud asset was being sold to investors at inflated prices. It's during the ramp that money is stolen, not during the crash. The crash merely reveals preexisting losses.

If you buy a gold bar, which at later appraisal turns out to be tungsten laced, it was at the point of purchase you were robbed and lost your money, not at appraisal. You shouldn't be mad at the appraiser or pass laws against appraisals.

Thu, 01/31/2013 - 13:01 | 3202846 LongSoupLine
LongSoupLine's picture

Ha ha Hassa!

Fuck you BOA. Fucking assholes...reap it pricks.

Thu, 01/31/2013 - 13:03 | 3202848 taraxias
taraxias's picture

Why don't central banks everywhere issue a joint proclamation that global markets will not be allowed to go down and spare us all this tragicomedy?

Or, invoke ciruit breaker rules if any stock drops 0.00001 %?

Or, cancel all trades if there's more sellers than buyers?

Or, lay criminal charges on anyone trying to sell a single share?

 

Don't you love these free markets.........LMFAO. 

 

 

 

Thu, 01/31/2013 - 14:36 | 3203251 Matt
Matt's picture

Or allow short selling, but have a government office whose job it is to create money out of thin air to buy stocks to create short squeezes anytime there are too many shorts.

Thu, 01/31/2013 - 13:57 | 3203067 Colonel Klink
Colonel Klink's picture

Banning shorts works...just like banning anything else booze, "assault" weapons, marijuana, and bad behavior.  Stupid politicians will never learn.  It seems like a worldwide affliction.  Stupid is as stupid does.

Thu, 01/31/2013 - 15:56 | 3203611 NoWayJose
NoWayJose's picture

Rather than ban short selling, it might be smarter to look at 'who' shorted this 'ahead' of the announcement...

Thu, 01/31/2013 - 16:13 | 3203698 JungleJim
JungleJim's picture

Forced buying !!!! Like Obama Care ....

Thu, 01/31/2013 - 16:17 | 3203705 Herkimer Jerkimer
Herkimer Jerkimer's picture

'

''

'

'

Stunning. Simply stunning.

Sucky-babies.

I have list of "things" that I speak to my rich old mommy about, and it has to do with us heading towards the apocalypse. Lines we thought we'd never cross.

She loves ZeroHedge.

You know, like "they" will silence the rating companies. Oh, yeah… Did that.

Enact legislation that will turn you upside down and shake you for ever last penny. Oh yeah… Did that. (California tax claw back.)

And then the idea that they are going to change the rules so that you cannot win.

Eventually, they will make the rules so that not only can you not take your marbles off the table, they will make so you MUST play.

Sounds crazy?

We crossed the crazy line years ago.

•J•
V-V

Thu, 01/31/2013 - 16:31 | 3203771 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I guess this thread is as good as any to keep up on the Monti Dei Paschi banking scandal.

Some updates.

http://www.reuters.com/article/2013/01/31/italy-montepaschi-idUSL5N0B0H3...

Standard & Poor's, which relegated Monte dei Paschi to junk status last December, cut its long-term credit rating on Thursday by one more notch to "BB". The agency cited concerns over potential losses from structured finance contracts, which it said revealed a risk of management weaknesses.

 

No shit captain obvious....

http://www.reuters.com/article/2013/01/30/us-italy-montepaschi-idUSBRE90...

On Wednesday Moody's rating agency said it had put the bank's Ba2 rating under review for a downgrade.

Prosecutors have already been looking at allegations of massive bribes taken to facilitate the Antonveneta acquisition as well as suspicions of fraudulent accounting over the derivatives transactions.

 

They have also put Monte dei Paschi itself under investigation under a law governing companies' responsibility for crimes committed by their employees.

 

On Wednesday, Milan prosecutors handed over to their Siena colleagues a separate inquiry into allegations that Monte dei Paschi executives took bribes to acquire toxic derivatives from Dresdner Bank via a Swiss consultancy named Lutifin.

 

http://mykdwz.com/news/articles/2013/jan/31/eba-says-new-derivative-rule...

MILAN (Reuters) - The European Banking Authority chief Andrea Enria said the new rules on derivatives under completion will reduce the chances of a new financial scandal like that emerged at Tuscan lender Monte dei Paschi di Siena .

"With the new rules on derivatives we are finalizing it will be more difficult to see a case (like Monte dei Paschi)," Enria said on the sidelines of a banking conference in Milan.

"We have to avoid that this case (of Monte dei Paschi) lead to generalizations," Enria said, answering a question about the credibility of Italian banks.

 

 

Thu, 01/31/2013 - 16:45 | 3203824 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I don't know how many "good" people are left working in finance and the banking industry still but this is looking like the Sandy Hook equivalent for pushing the system on reforms for derivatives trading. Don't waste the building momentum.....

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