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How China's (Formerly) Richest Man Crashed His Own Fortune When He Tried To Sell A Stock

Tyler Durden's picture




 

On Wednesday, we reported on what was certainly the biggest market news of the week when in under one second, Chinese solar company Hanergy Thin Film crashed by nearly 50% due to what are still unknown reasons. As a reminder, before its crash and indefinite trading suspension, Hanergy’s market value was higher than all other listed Chinese solar companies combined and six times the value of First Solar, the biggest producer of thin-film solar panels.

Aside from the dramatic move, the reason why the wipeout of this tightly held stock was particularly memorable is because it took with it some $14 billion or nearly half of majority owner Li Hejun's $30 billion fortune, who as we reported previously, is China's richest man, having recently overtaken Alibaba's Jack Ma. Or rather was.

A quick tangent into how Li built up his stratospheric paper wealth on very short notice.

As noted above, the bulk of Li's fortune comes from his 80.8% stake in Hanergy, whose market cap had topped at approximately $40 billion, or greater than the market cap Sony and Twitter. Even more notable, is that the bulk of the appreciation in the stock took was a result of what appears to have been an aggressive buying campaign by none other than Li himself, who as Bloomberg recounts, was the single biggest buyer in the name as it soared since the start of January, becoming "wealthier" (on paper) by buying ever more stock, thus pushing his own net worth every higher!

From April 30, three weeks before the crash:

Hanergy Thin Film Power Group Ltd.’s executive chairman raised his stake in the Chinese solar equipment maker this  month, buying 53.9 million shares as the company’s market value surged.

 

Li Hejun bought the shares in seven transactions at prices of HK$6.90 to about HK$6.95, with the latest purchase on April 23, according to transaction details filed in statements to the Hong Kong Stock Exchange. The company closed at a record HK$7.88 on April 23.

 

Hanergy has surged more than six-fold in the past year to a market value of about $39 billion amid questions about its valuation and revenue.

What is certainly peculiar is that even as Li was aggressively single-handedly pushing the price of the stock, thre were many questions about the company's operations. Of note, about 61% of the company’s revenue was sourced from sales it made to its own parent company Hanergy Group, and its affiliates.

The relationship was laid out by Bloomberg as follows: "The publicly traded entity makes factory equipment that produces thin-film solar panels. Closely held Hanergy Group makes the panels and installs them, though it has never disclosed its production output. Hanergy Thin Film also buys PV panels from its parent company to make into finished solar parks."

As the FT reported first 5 months ago, Hanergy "has been racking up enviable revenues largely through sales between its listed subsidiary, HTF, and itself." No wonder the company has been desperate to distract attention from its cooked books, and instead had focused on pure marketing, pitching itself as a company that promises to revolutionize solar power and to become the Apple of green energy.

Perversely, it was on January 28 when the Financial Times first raised questions about the incestuous relationship between the two entities: since then, the stock of Hanergy had risen 86%... until it crashed.

It wasn't just Apple: Hanergy needed more buzzwords and tried to be like that other famous "alternative energy" unicorn, Tesla: a whole lot of "story" fluff, much hype and no substance. Because lacking from its earnings report was an overall estimate for how much equipment it will ship or install this year, a figure that’s prominent in the reports of panel makers such as Trina Solar and Yingli Green Energy.

There were many other flashing red warnings: Hanergy Thin Film’s receivables surged 86 percent last year to HK$4.3 billion, with the parent company responsible for about half of the outstanding sum.

And another: a year ago, the Kowloon headquarters of Hanergy Thin Film housed a little-noticed subsidiary of Li’s Hanergy Holding, which initially was a hydroelectric-dam operator with more than 6 gigawatts of projects.

And another: not content with being a Tesla-clone, the company was also a Valeant-style "rollup": the company has been investing in thin-film technology since 2009. It’s bought four overseas companies since 2012 -- the U.S. producers Global Solar Energy Inc., Miasole Inc. and Alta Devices and the Solibro unit of Germany’s Q-Cells.

And another: when the FT wrote another story on March 25 showing that Hanergy’s shares listed in Hong Kong tend to rise in the final 30 minutes of the trading day, the company issued a statement dismissing the story as “innuendo.”

Not everyone was fooled by the epic lie: as Bloomberg also reports, on February 27, analysts Charles Yonts and Johnny Lau at CLSA Asia-Pacific Markets in Hong Kong issued a report saying the stock was wildly inflated. Jenny Chase, lead solar industry analyst at Bloomberg New Energy Finance, published a note on March 6 saying Hanergy is working with “unproven” technology and that it hasn’t detailed a level of installations that would help justify its valuation.

Paradoxically, the more public caution about Hanergy's parabolic, circular surge there was, the higher the stock traded... until the morning of May 20, when Li's was suspiciously absent from the company's annual meeting.  

On that day, as the WSJ recalls, heavy trading in Hanergy’s stock began shortly before said annual general meeting began at 10 a.m. in Hong Kong on Wednesday. "At the time, trading in the stock was furious, with traders offering to buy and sell millions of shares at a time. Eventually, there were far more shares being offered for sale than there were buyers."

As the WSJ further reports, "at 10:17 a.m. and 23 seconds, a large 426,000 share sell order piled up at the current market price of HK$6.80. Two small trades were done at slightly lower prices, but then the price at which traders were willing to buy the shares fell to HK$3.45, 48% below the market’s price."

The instantaneous collapse at precisely 10:17:23 am in the Hanergy stock price can be seen on the following Nanex chart.

Such market microstructure airpockets are very familiar to frequent Zero Hedge readers, appearing periodically and unexpectedly in virtually all HFT-traded stocks, and occasionally, such as on May 6, 2010, in the entire market.

As Nanex' Eric Hunsader notes, "a large seller exhausted liquidity and tipped the market over.. boom."

WSJ's take:

This low bid showed that there weren't many buyers in the market, potentially setting the stage for a big share decline. Computer algorithms, which trade automatically based on current market data, likely detected the sudden shift and reacted by selling more or pulling out of the market altogether.

 

Nearly 16 hundredths of a second later, a series of smaller buy orders ranging from 8,000 to 30,000 shares trades were made at rapidly declining prices. The first buy order was priced at HK$6.69, and four tenths of a second later, a trade occurred at HK$6.10. Once that trade occurred, the next highest bid became HK$3.45 and over the next several hundredths of a second, the price that people were willing to sell shares fell to HK$4.50.

 

A trade occurred at HK$4.50, meaning the official market price had fallen by 26% in fractions of a second. Hanergy shares briefly recovered but then sold off again. They were trading at HK$3.91 when the shares were suspended at 10:40 after falling 47% and wiping out $20 billion worth of market value.

Cited by the WSJ, Hunsader said the collapse "could have been caused by high-speed traders pulling out of the market due to heavy selling by an investor looking to unload a large chunk of stock."

Bingo.

Because as it turns out, after accumulating a gargantuan position in the stock in order to diffuse speculation that his primary investment vehicles is a fraud, Mr. Li decided he had had enough. And decided to sell.

He did this at first by shorting several billions shares of the stock in which he had built up an 80% stake.

According to the WSJ, "on Friday in a filing with the Hong Kong Stock Exchange, Mr. Li disclosed he went short 759.7 million shares in Hanergy on Monday, two days before the annual meeting. This represented 1.9% of the company and about 5.3 times that day’s trading volume of Hanergy shares."

Bloomberg adds that Li "also increased his short position to 7.71 percent of Hanergy’s issued share capital from 5.81 percent on the same day."

The following Bloomberg screenshot reveals the original 5.81% short stake between China Geiko Investments and Hanergy Invest Ltd, both shell companies controlled by Li: an amount equal to about 2.4 billion shares.  The problem: at the same moment he was also long some 30.6 billion shares.

 

Yet something must have provoked Li to switch his posture from a chronic buyer to an acute shorter/seller.

That something was a very fundamental factor, the most fundamental of all - the company had run out of money.

As Caixin reported, "the solar panel manufacturer whose listed subsidiary has suffered a sell-off of shares in Hong Kong failed to repay bank loans, sources close to the parent company say."

Worse, the selling avalanche and the subsequent suspension of trading means that all hell may be about to break loose according to Caixin, Hanergy had "used shares in its listed unit to take out bank loans, but has been unable to repay some of them. The share sales escalated after debtors made little progress in negotiations with the company over the defaults, those sources said."

More:

Hanergy secured loans from Jinzhou Bank, in the northeastern province of Liaoning, in the second half of last year after the bank gave it an 8 billion yuan credit line, other people close to the firm said. In January last year, Hanergy reached a deal with China Minsheng Bank and a credit consortium the bank leads to provide the company with loans of no less than 20 billion yuan.

In other words, the stock price itself had become the collateral against which the company was borrowing cash. So once the long-overdue selling finally started, the margin calls become a self-sustaining feedback loop and would flood the company with demands for ever more cash, and lead to a prompt and painful collapse.

And nobody knew this better than the man who had orchestrated this entire Ponzi scheme: Mister Li himself.

In other words, having sunk billions in real cash to generate paper profits against which to take out loans, Li tried to cash out. The problem - and one which we warn day after day when we point out the ever declining volume of the market on the way up - is that while there was no shortage of willing sellers as the stock was rising, once he pushed the bid a little too aggressively to accelerate his exit, he found just one thing: a bidless vacuum.

What happened next? This.

 

Don't expect the company to rebound promptly when it reopens for trading. If it ever reopens, as by then the banks will have sent some of their less reputable "collection agents" to make sure they "collect" the money owed them by Mister Li, especially since they can't sell a halted stock which serves as collateral for their loans.

As for Li, all of this could have been avoided: he merely had to keep bidding a worthless stock to infinity. Sadly for him, unlike central banks, he does not have access to infinite cash with which to do so.

Incidentally, all of this should remind regular readers of an almost identical example on this side of the Pacific.

Remember CYNK: the illiquid stock of a company which did not even exist, and yet whose market cap rose to several billion, before a bout of selling wiped out all the equity holders, and forced the regulators to halt it and delist it, in the process wiping out its entire "value" built up courtesy of gullible idiots believing in "get rich quick" Ponzi schemes.

This is what we wrote last July, in a post titled "How The Market Is Like CYNK." In retrospect, our prediction is becoming painfully accurate, if only to billionaires willing to monetize their "paper" profits.

For all the drama and comedy surrounding the epic idiocy in which a bunch of "investors" took the price of non-existent company CYNK from essentially zero to a market cap of over $5 billion in under a week, most people missed the key message here: the stock is a harbinger of what is happening to the entire market. Because while those defending what is clear irrational exuberance, scratch that, irrational idiocy are quick to point out that CYNK's epic surge took place on less than 0.1% of its outstanding shares, these are the same people to say precisely the opposite about the S&P 500. "Ignore the collapsing volumes sending the stock market to all time high - it's perfectly normal" is an often repeated refrain by the permabullish crowd. Just not when it involves case studies in market insanity like CYNK apparently.

 

Perhaps ironically, it was the concurrent most recent crisis in Europe, that involving Portugal's cryptic Espirito Santo group, whose top-most HoldCo is largely shrouded in secrecy yet which somehow is not a deterrent to the sellside community to issue one after another "all is clear; don't pull your deposits please" note, that confirmed not only that nobody has any idea what the real situation of European banks is, but how the entire capital market has now become nothing more than one glorified CYNK penny-stock turning into a mid-cap.

 

Deutsche Bank's Jim Reid explains:

 

Whatever one feels about financials and the wider financial system, credit markets did arguably get a small glimpse of what things will be like when this cycle does actually end as the structurally impaired liquidity that exists in credit caused a small amount of panic yesterday morning before markets recovered in the European afternoon session. Liquidity is really poor in credit these days which doesn't matter when markets are in buy only mode as they have been for many quarters now, but it does matter on the days when you get a negative story.

 

In other words, just like the CEO of CYNK who promptly "made" a few billion in paper profits, it feels great to "make" money on virtually no volume. The problem arises when one tries to cash out of paper and into all too real profits.

 

And here is what happens when one does finally try to book profits: moments ago the OTC BB just announced that, finally, CYNK was finally halted.

 

Increasingly we are witnessing how this "market", if this rigged, illiquid, central-bank manipulated cesspool can be called a market, is precisely like CYNK.

And as of this moment, Mister Li and Javier Romero, the President, CEO and secretary, in fact the only employee, of CYNK certainly have much in common: they see what happens when you levitate a company to mindblowing extremes on no volume and when you own the bulk of the float... and what happens when you try to offload it.

Sadly, this is a lesson which the entire market, and all those who are buying on the way up, and confusing paper profits with actual wealth, will also learn the hard way.

Because between CYNK and now Hanergy, we have had a very clear glimpse of the endgame: and as of this moment nobody can say they were not warned about how this most manipulated of asset bubbles ever, ends.

 

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Fri, 05/22/2015 - 18:22 | 6123079 Newsboy
Newsboy's picture

It's like trying to convert all the paper gold to physical gold.

Reality is suddenly unmasked.

Fri, 05/22/2015 - 18:31 | 6123105 Parsecs Taxi
Parsecs Taxi's picture

Kinda like Indian poker.

I don't know if that's really Indian poker, or if it's First Nations poker.

ORI?

Fri, 05/22/2015 - 18:45 | 6123133 NoDebt
NoDebt's picture

The only question is "how many more like this?"

I suspect the answer is a lot closer to "pretty much all of them" than it is to "just a handfull".

The Chinese are still way ahead of us in the area of fraudulent accounting.  Lying isn't even something they consider bad or wrong.  It's just part of doing business.

 

Fri, 05/22/2015 - 19:32 | 6123197 Save_America1st
Save_America1st's picture

I thought the Chinese shot fuckers like this in the head and then harvested their organs?

 

Well if they stopped doing that they should reinstate the policy...

New Chi-Com help wanted ad:  Executioners wanted...must own your own sword and be proficient at harvesting vital organs for sale on black market.

Preeze appry now and ChiCom.gov

We ruv you rong time

Fri, 05/22/2015 - 19:58 | 6123269 theXman
theXman's picture

No, they shoot poor peasants and anti communist activists to harvest their organs to save well-connected fat cats/pigs such as the CEO of Hanergy 

Fri, 05/22/2015 - 20:09 | 6123292 knukles
knukles's picture

Hanergy Thin Film Han's Thin Market
No tickie no laundry

Need some fuckin' algos in there to provide liquidity, Blichez

Fri, 05/22/2015 - 20:45 | 6123363 kaiserhoff
kaiserhoff's picture

But, but, but,

it's different in China.

Can't remember exactly what is different.  Must need another drink.

Fri, 05/22/2015 - 20:54 | 6123389 disabledvet
disabledvet's picture

They're better at knitting than we are.

NOW KNIT HARDER AND KNIT FASTER!

Shibor to the moon!

Sat, 05/23/2015 - 00:24 | 6123817 Oh regional Indian
Oh regional Indian's picture

@ Parsecs T, my Indian s of the Asian variety....

Meanwhile, if you are nice and floaty....soem drumming with a twist...

https://www.youtube.com/watch?v=0xtJApsB4cA&feature=youtu.be

Sat, 05/23/2015 - 00:59 | 6123866 Manthong
Manthong's picture

The idiot probably had a zillion whan Ag short.

Sat, 05/23/2015 - 02:49 | 6123942 Dame Ednas Possum
Dame Ednas Possum's picture

Fruck you plice discoveree.

Flee mlakets my arrrss.

Sat, 05/23/2015 - 04:24 | 6124015 winchester
winchester's picture

as long it not happen to apple,  pls do not wake me up.

Sat, 05/23/2015 - 06:01 | 6124056 Arnold
Arnold's picture

Get cher bottled air hey ah.

 

(right next to the bottled water, mista)

Sat, 05/23/2015 - 06:47 | 6124082 negative rates
negative rates's picture

Solar's fine, just don't try to make electricity from it.

Sat, 05/23/2015 - 06:01 | 6124058 Manthong
Manthong's picture

“virtually all HFT-traded stocks,”

Isn’t the HFT label superfluous?

Sat, 05/23/2015 - 09:07 | 6124233 new game
new game's picture

somewhere the guv.org subsidy ran out. all shames expose themselves eventually. cue spain.

solar is a joke til oil at 200/bbl. then there is the economic life of twenty years, a tic on the clock...

oil, baby, oil; burn, baby, burn til edge of cliff for useless eaters canibalizing the earth then each other- the truely great reset of humanity. hope i'm dead by then...

my positive spin on the future, ha, lol...

Sat, 05/23/2015 - 04:32 | 6124018 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

Admittedly, instances like these boost somewhat the credibility of Zero Hedge's anonymous analysts and commentators, known collectively as the "Tylers".

Sat, 05/23/2015 - 04:57 | 6124029 Dave Thomas
Dave Thomas's picture

Fonze's almost made it to the pontoons, you've got a few more yards till we get there.

 

Fri, 05/22/2015 - 22:46 | 6123621 PT
PT's picture

That's the trouble with having all the money in China:  No-one can afford to buy your stuff when you try to sell it.

A bit like the end of the Monopoly game where you are the richest and own all the properties and have most of the money (errr, some of the money - the bank still has shitloads!) but then you too have to stop playing because you suddenly run out of customers.

Obviously didn't have the right connections.  Need some compulsory superannuation companies and then you can sell your shit to them - no-one will notice for 40 years and then it won't be your problem ...

Fri, 05/22/2015 - 22:51 | 6123631 PT
PT's picture

... and that is why you must NEVER sell!

Buy and borrow, buy and borrow ... but you must never sell!

Sat, 05/23/2015 - 01:09 | 6123879 Manthong
Manthong's picture

heh.. heh..    be like a CB  (good rhyme)

everything goes up.. nothing goes down

it's what you want in a good hooker

Fri, 05/22/2015 - 20:33 | 6123337 El Oregonian
El Oregonian's picture

Ahhh, another paper tiger goes up in flames...

Fri, 05/22/2015 - 20:49 | 6123374 kaiserhoff
kaiserhoff's picture

Confucius say:  Man who have tiger by the tail,

          is too busy for philosophy.

Sat, 05/23/2015 - 06:50 | 6124085 negative rates
negative rates's picture

And man who have tiger by tooth, is too busy to golf. 

Fri, 05/22/2015 - 23:20 | 6123687 Taras Bulba
Taras Bulba's picture

"just part of doing business" heh

stmt from company on the unusual activity, or, nothing to see here, just move along:

http://www.hanergy.com/en/content/details_37_2482.html

Sat, 05/23/2015 - 16:22 | 6125145 max2205
max2205's picture

Yes, we need the firing squad in the courtyard tomorrow at noon.

Thanks and have nice day.

 

 

Fri, 05/22/2015 - 19:58 | 6123268 GOSPLAN HERO
GOSPLAN HERO's picture

Any U.S. government document marked CONFIDENTIAL is a classified document under federal law ... Hillary stored classified documents on a private server.

 

Hillary Clinton broke federal law, comrades.

Fri, 05/22/2015 - 20:40 | 6123354 El Oregonian
El Oregonian's picture

" Hillary stored classified documents on a private server."

uh, I'm sure she has much more "Stored" in hidden meat lockers around the world.

Fri, 05/22/2015 - 21:00 | 6123398 NoPension
NoPension's picture

They will put her in that special jail, reserved for ex- senators and such.
She will be down the corridor from Corzine.

In other words....don't hold your fucking breath waiting for something to come of it. They're special people, don't you know. Our little people laws don't apply. Like all politicians, buerocrats and cops. Also Wall street ers, bankers and the uber wealthy. Except for Martha Stewart. She must not be part of the club.

Sat, 05/23/2015 - 01:42 | 6123899 monkeyshine
monkeyshine's picture

Usually the guy running the pyramid scheme takes money out. He doesn't put more money in. 

Are there  pyramids in China?

Sat, 05/23/2015 - 03:43 | 6123990 OldPhart
OldPhart's picture

Apparently so...

http://en.wikipedia.org/wiki/Chinese_pyramids

 

therefore, pyramid schemes are ingrained.

Fri, 05/22/2015 - 23:47 | 6123749 Buck Johnson
Buck Johnson's picture

This is going to end badly for everybody, no wonder they are buying resources around this planet.

 

Sat, 05/23/2015 - 03:51 | 6123995 Luckhasit
Luckhasit's picture

Perfect analogy.

Fri, 05/22/2015 - 18:24 | 6123086 PhoQ
PhoQ's picture

One has to assume his dummy corporation was shorting his own stock up the ass.

Fri, 05/22/2015 - 19:30 | 6123196 thepigman
thepigman's picture

China would never defraud anyone. Ask my dead rottweiler who made the mistake of eating  Alpo with the secret Chinese industrial

waste "high protein" sauce five years ago.

Fri, 05/22/2015 - 19:49 | 6123247 conscious being
conscious being's picture

Here when you try to buy Alpo in the red bag for your dog, you get Arpo in the blue bag instead. When you say - Wait, that's not Alpo, that's Arpo, they look puzzled and say - Yeah, Arpo. And the convo goes nowhere. Dog's trying to work his way thru it.

Sat, 05/23/2015 - 02:54 | 6123946 Dame Ednas Possum
Dame Ednas Possum's picture

The southern wing of that factory makes baby food.

Fri, 05/22/2015 - 18:26 | 6123090 Winston Churchill
Winston Churchill's picture

Sucks when you run out of suckers.

Sat, 05/23/2015 - 02:59 | 6123954 Dame Ednas Possum
Dame Ednas Possum's picture

There's gotta be a t-shirt and a bumper sticker in that one.

The fools often ignore this part of more fool theory.

Who'da thunk?

If only they'd paid more attention when they played musical chairs and pass the parcel.

Fri, 05/22/2015 - 18:29 | 6123099 Tall Tom
Tall Tom's picture

The collapse will be epic.

 

If there are any survivors of the holocaustic wars and if there is some continuance of any civilization then this will be recorded in history.

 

But we are living in unprecedented times with the ability to disintegrate into extinction so I would not count upon that.

Fri, 05/22/2015 - 18:37 | 6123122 PhoQ
PhoQ's picture

Don't worry. All human knowledge has been saved for posterity on 33 1/3 RPM discs.

Fri, 05/22/2015 - 19:34 | 6123204 Winston Churchill
Winston Churchill's picture

Wax and nukes don't mix.

Fri, 05/22/2015 - 20:51 | 6123380 SubjectivObject
SubjectivObject's picture

CDP's and nukes don't mix either.

Fri, 05/22/2015 - 21:37 | 6123482 Joe Camel
Joe Camel's picture

Well, if the media is a 33 1/3 RPM disc, the knowledge includes Cat Scratch Fever by Ted Nugent.

Sat, 05/23/2015 - 01:18 | 6123885 PhoQ
PhoQ's picture

Damn right!

Sat, 05/23/2015 - 01:51 | 6123911 monkeyboy
monkeyboy's picture

Stranglehold seems moar appropriate in this instance.

Sat, 05/23/2015 - 03:45 | 6123992 OldPhart
OldPhart's picture

All I got are 78's for the Victrola. Pretty sure bakelite turns to shit under nuclear heat.

Fri, 05/22/2015 - 18:30 | 6123103 indaknow
indaknow's picture

Good. I hope he loses the other half too.

Fri, 05/22/2015 - 18:31 | 6123104 order66
order66's picture

"Liquidity". Drink.

Fri, 05/22/2015 - 18:31 | 6123107 q99x2
q99x2's picture

Jack Ma looks more like a q99x2 than Li Hejun.

Fri, 05/22/2015 - 18:40 | 6123124 reader2010
reader2010's picture

Sooner or later all ruling Elites of the world will need to Disallow individuals from selling sticks I mean stocks. Only investment banks and brokerage houses can sell. By law everyone else has to buy at least every three weeks. Otherwise they get thrown into forced labor camps to build even better society. 

Fri, 05/22/2015 - 18:48 | 6123140 WTFUD
WTFUD's picture

So .Gov/Fed are strong-arming companies to buy back their own shares to provide a resemblance of price credibility.

Spooky what's festering way way way Out There!

Fri, 05/22/2015 - 18:53 | 6123145 ebworthen
ebworthen's picture

What?  He didn't sell near the peak of the ramp up?

Well, that's what greed gets you.  I pity the Grannies knitting sweaters.

Fri, 05/22/2015 - 18:56 | 6123148 p00k1e
p00k1e's picture

Good for them. 

Fri, 05/22/2015 - 18:58 | 6123149 Meremortal
Meremortal's picture

American stockbrokers know how to handle such a sale. 

Let's say a huge pension fund wants to sell a LOT of Apple. The pension fund calls their broker and says, Sell this much Apple, but don't kill the price too much while you are at it. We don't want our last sales to be at a far lower price than our first."

The pension fund's broker, let's say it's Goldman, puts out a spiff (bonus) on Apple. All the brokers get on the phone to their retail clients and say, "We just got a buy recommendation on Apple, you should take down a 100 shares today." Do that all over the country and you can lose a lot of shares without trashing the price badly.

Just one of the reasons why any broker who gives you picks is your competitor, not your friend.

 

 

Fri, 05/22/2015 - 20:07 | 6123285 razorthin
razorthin's picture

The movie was "Wall Street". "Blue Horseshoe loves Anacott Steel"

Fri, 05/22/2015 - 22:23 | 6123577 AIIB
AIIB's picture

That's just a dog with different fleas...

Fri, 05/22/2015 - 18:58 | 6123150 Seasmoke
Seasmoke's picture

Coming to a company near you. 

Fri, 05/22/2015 - 19:02 | 6123155 surfvin
surfvin's picture

Tenuous

Fri, 05/22/2015 - 19:30 | 6123156 buzzsaw99
buzzsaw99's picture

take out loans to jack up share prices so you can take out moar loans with which to jack up share prices. hell that is called the us model of corporate management. angelo mozilo made a fortune doing that insider shit may he rot in hell.

You know what capitalism is? Gettin' fucked! [/Scarface]

Never get high on your own supply. [/Notorious B.i.g.]

Fri, 05/22/2015 - 19:13 | 6123175 Duc888
Duc888's picture

 

....it's all just zero's and ones on a screen now, backed by 100% bullshit and lies.

Fri, 05/22/2015 - 19:53 | 6123255 conscious being
conscious being's picture

You forgot murder. 100% backed by bullshit, lies and murder. Kudos to RM for making this point.

Fri, 05/22/2015 - 19:40 | 6123224 GRDguy
GRDguy's picture

The greater fool was indeed THE greater fool.  

The cost of something for nothing is exceedingly high. 

Fri, 05/22/2015 - 19:42 | 6123228 Flakmeister
Flakmeister's picture

Don;t forget he still walked away with a few billion in his pocket...

And when you get down to it, having 5 billion vs 10 billion is a wash, unless you have rules that reward self-gratification through greed...

Fri, 05/22/2015 - 19:44 | 6123234 buzzsaw99
buzzsaw99's picture

yeah except he lives in china where they execute maggots instead of giving them cufflinks.

Sat, 05/23/2015 - 08:37 | 6124186 GMadScientist
GMadScientist's picture

Still has a few billion on paper, and who knows how much he's managed to skim in cash he can walk away with (well, the people laundering it in Macau know, but...).

Fri, 05/22/2015 - 19:54 | 6123258 conscious being
conscious being's picture

Run away!! Its a trap!!

Fri, 05/22/2015 - 20:03 | 6123281 razorthin
razorthin's picture

Not that he would have anyone to sell to, but this jackass needs to learn how to exit.

Fri, 05/22/2015 - 20:12 | 6123297 knukles
knukles's picture

Hey mom!  How you feelin' today.  Say, I gotta deal for you.

Fri, 05/22/2015 - 20:14 | 6123301 GoldSilverBitcoinBug
GoldSilverBitcoinBug's picture

Just a classic Pump and Dump scheme made of dozen billions nothing new, apart that you can do that now in a major exchange)...

Fri, 05/22/2015 - 20:18 | 6123308 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

"As for Li, all of this could have been avoided: he merely had to keep bidding a worthless stock to infinity. Sadly for him, unlike central banks, he does not have access to infinite cash with which to do so."

 

It's as if a billion light bulbs suddenly turned on at the same time...

Sat, 05/23/2015 - 08:39 | 6124191 GMadScientist
GMadScientist's picture

Surged brightly...and then popped.

Fri, 05/22/2015 - 20:28 | 6123329 The Ingenious G...
The Ingenious Gentleman's picture

I'm sure those grannies with the knitting weren't foolish enough to invest in that.

Pretty sure.

A little bit sure.

Fri, 05/22/2015 - 20:51 | 6123379 Wild Theories
Wild Theories's picture

Wait a minute, wait a minute

he was undone by HFT bots?

o my god, please don't tell me HFT algos did something good? I think my head's gonna explode

Fri, 05/22/2015 - 21:05 | 6123395 Ajax_USB_Port_R...
Ajax_USB_Port_Repair_Service_'s picture

Mister Li did the best he could to lighten his stock position during a 'difficult' period. You stupid Chinese investors were supposed to be there to buy up his shares. Blame the HFT-traders that sat on their hands and didn't buy the dip. You've let Mister Li down. It's YOUR fault trading had to be suspended. Idiots! BTFD! BTFD or NOBODY wins. Change those algos or the party dies.

Fri, 05/22/2015 - 21:33 | 6123421 Dre4dwolf
Dre4dwolf's picture

what people fail to understand is, that if you have say a stock with a market cap of 1 billion, if someone goes to sell say 100 million worth of shares, the rest of the shares will lose atleast 10% of their current value.

The real book value of any given stock is equal to the total value of the stock if all shares were sold.

That goes to say that , if in the same day every outstanding share was sold you would take the total average sell price per share as value x amount of shares.

This number has to be around 20% probably of floating market cap value.

So the real market cap of any given share is around 10~20% of its pre-adjusted value.

A stock/company with a market cap of 100 million is probably only worth ... 5~30 million depending how rapidly someone wants to liquidate... there is a time value of money being taken for account, sure stocks are "like cash" but if you want 100 million dollars, out of a stock you own with a market cap of a billion dollars, you are going to have to slowly and methodically sell those shares over a prolonged period of time (say a month or so) depending how liquid the stock is (how much average buy volume there is out there) this is what makes a market with low volume a VERY RISKY PLACE TO PARK MONEY.

Pretty much the dumbest place to put 100,000,000$ is in a stock portfolio (if you foresee a time soon where you would potentially need to access all that capital at once).

 

Or something like that, im sure someone else out there could explain it better than me.... would be nice to know if there already exists a "real" metric like I described above. .. . 

Some Rough math would be like:

Outstanding shares "500 shares"

Shares sold "500"

For simplicity lets assume that the starting sell price is 1$ so at one point the starting market cap is 500$ (total value of all shares).

If a sell-off were to occur and as every share was sold the sale price declined by say . . . . 0.01$ (so we started selling at one dollar and the next share sold sold at 99cents)

If that continued, by the time all 500 shares were sold, all shares would of been transferred to new owners for a total of $99.34.

And thats IF THE MIN. SELL PRICE IS 0.01, as it would of hit 0.01 after the 100th share is sold so market cap is probably even more over-stated than I said.

So a liquidity test of any given share should see the market cap of any given stock drop by a factor of atleast. . .  5 ~ 10 depending on volume and exuberance of buyers.

 

 

--------Given that information----------

If you were a billionaire, and another billionaire wanted to dump 100,000,000$ worth of stock, would you hand that billionaire 100,000,000$ for his shares? Would you feel confident that you could turn around and dump those shares for 100,000,000$ AGAIN if you needed to? Would you feel confident that the market could absorb you making a withdrawal?

 

The greatest ponzi scheme in the world is the stock market, because it gives the illusion that there is money there, when there isn't.

Fri, 05/22/2015 - 21:34 | 6123476 Kina
Kina's picture

hey.. who stole my floor?

Sat, 05/23/2015 - 08:39 | 6124194 GMadScientist
GMadScientist's picture

Same ones that stole your chute.

Fri, 05/22/2015 - 21:41 | 6123492 The Ingenious G...
The Ingenious Gentleman's picture

The South China Morning Post explains how this works:

http://www.scmp.com/business/money/article/1807483/jaw-dropping-share-pr...

Exerpt

George is a private entrepreneur from the mainland. He has listed his business in Hong Kong. The first thing he does on listing here is not improving his business, but pushing up the price of the stock.

Not that he is terribly interested in the share price per se. He only wants a multibillion-dollar company so that he can borrow from mainland banks. Now, that is where the real honey is.

To push up the price, he has to corner the shares in the market. He needs some unconnected parties to hold the shares on his behalf to stay out of the regulators' radar.

Things like this used to be quite difficult and would be done by fund managers under the table. Thanks to the hordes of mainland financial institutions and private funds coming to the Hong Kong market these days, deals like these can now be done in broad daylight.

Some of these institutions even have teams screening such proposals. In the current buoyant market, a team like that can easily be sitting on eight to ten proposals, each asking for US$30 to US$50 million.

George signs an agreement with a private fund. It buys a stake in George's company from the market. In return, George promises to buy back the stake within 12 months, with a guaranteed return of 20 per cent. In some cases, deals like these are done through convertible bonds.

The fund isn't stupid. It pledges the agreement to a mainland financial institution and gets a sizeable loan itself.

It pays US$30 million to buy the stake but gets a US$45 million loan because George has managed to push up the share price by 50 per cent and therefore the value of the contract, thanks to the drop in share supply. In short, the higher the share price, the more both George and the fund helping him are able to borrow......

Fri, 05/22/2015 - 21:58 | 6123527 Kina
Kina's picture

in valuing a share also need to look at the intrinsict value of company assets. thus a company with real assets worth 500,000 and with 500,000 shares out there has asset backing of 1.00 per share....provided they are not a loss making company

Sat, 05/23/2015 - 03:10 | 6123961 Dame Ednas Possum
Dame Ednas Possum's picture

Absolutely.

Just look at Face-schmuck and Twatter.

Sat, 05/23/2015 - 08:41 | 6124200 GMadScientist
GMadScientist's picture

Whaddaya mean? Faceshnook must have thousands of those stupid face-fucker headsets laying around. :)

Fri, 05/22/2015 - 22:18 | 6123561 roddy6667
roddy6667's picture

He only has $16 billion dollars left. He's destroyed?

Sat, 05/23/2015 - 05:52 | 6124050 SpanishGoop
SpanishGoop's picture

Apparently all on paper and subject to debt collection.

 

Sat, 05/23/2015 - 11:35 | 6124549 Herd Redirectio...
Herd Redirection Committee's picture

Whats his EQUITY position?  If he owes $16 billion (which is likely), then its not much, is it?

Fri, 05/22/2015 - 22:27 | 6123584 Downtoolong
Downtoolong's picture

There’s pump and dump, and then there’s P U M P   AND   D U M P !!!!

This is why market cap valuations are meaningless. Do you really think it would be any different if the largest shareholders of Tesla, Twitter, Facebook, Alibaba, or any other hot money stock tried to dump their shares in the open market? It’s all an illusion propped up by mountains of freshly printed debt.

Sat, 05/23/2015 - 08:42 | 6124201 GMadScientist
GMadScientist's picture

Take a look at stock buybacks. There's plenty of "dumping" going on in the open market.

Fri, 05/22/2015 - 22:37 | 6123604 HeavydutyMexica...
HeavydutyMexicanOfTheNorthernKingdom's picture

Family Guy Bitchez!

Sat, 05/23/2015 - 00:24 | 6123815 BeerMe
BeerMe's picture

TPP is moving forward and we still don't have anything on ZH.

Sat, 05/23/2015 - 00:52 | 6123852 Magooo
Magooo's picture

How is this any different than what is happening across the board with most companies?

 

They tap into ZIRP cash --- buy back their stocks ---- and the markets bust records month after month after month.

Sat, 05/23/2015 - 01:20 | 6123887 starman
starman's picture

little yellow fuckers sure learn fast ....from the USA!

 

Sat, 05/23/2015 - 08:36 | 6124184 GMadScientist
GMadScientist's picture

Those little yellow fuckers own you.

Sat, 05/23/2015 - 12:31 | 6124652 1stepcloser
1stepcloser's picture

Ruck them!

Sat, 05/23/2015 - 09:57 | 6123927 Yperkeimenos
Yperkeimenos's picture

From a technical analysis point of view the crash was to be expected.The chart clearly shows that after more than a 100% rally, from january 2015 to the end of february 2015,heavy trading with huge volumes appeared at March and April while the stock was consolidating. Usually that means the price is at peak levels and is about to correct,especially after such a fast and wild Bull run. If you look closely the same pattern appeared in the Gold Price Chart during 2011 when it peaked. All i can say is that Mr Li should take lessons in manipulation from those bankers that recently admitted manipulating the Forex market.Now that i think about it the Land of the Free really lacks a formal school teaching manipulation techniques.Hmmmmm,oh wait that's wall street.

Sat, 05/23/2015 - 02:41 | 6123938 MKD
MKD's picture

.

Sat, 05/23/2015 - 03:16 | 6123968 nah
nah's picture

they are born that way

Sat, 05/23/2015 - 03:43 | 6123989 Luckhasit
Luckhasit's picture

Piece-mail that shit, doesn't he read ZeroHedge!

Sat, 05/23/2015 - 03:48 | 6123994 ptoemmes
ptoemmes's picture

A billion here, a billion there...

 

...even if Senator Dirksen never really said "...pretty soon you're talking real money".

 

http://en.wikiquote.org/wiki/Everett_Dirksen

Sat, 05/23/2015 - 04:01 | 6123999 chubakka
chubakka's picture

"a bidless vacuum"  how cool is that?  talk about royally screwing yourself.  

Sat, 05/23/2015 - 04:17 | 6124012 Jack Daniels Esq
Jack Daniels Esq's picture

Zounds - thought that was the Tesla Bitchez ....

Sat, 05/23/2015 - 05:11 | 6124035 random999
random999's picture

Twitter?? I'd rather have the hanenergy shares, they're more likely to exist in 20 years than twitter.

But sure it would be easier to sell the twittershares without crashing the market.

Sat, 05/23/2015 - 07:04 | 6124099 SMC
SMC's picture

What? No Government Bailout?  The Horror!  ROFL!!!

Sat, 05/23/2015 - 07:19 | 6124112 SpanishGoop
SpanishGoop's picture

Like blowing a chewing gum bubble.

Nice if it gets bigger and bigger put if it pops your face will be covered in it.

 

Sat, 05/23/2015 - 07:28 | 6124119 Downtoolong
Downtoolong's picture

Just when you think there could be nothing shittier than a Chinese engineered product, behold the product of Chinese financial engineering.

Sat, 05/23/2015 - 09:10 | 6124241 GMadScientist
GMadScientist's picture

Does this mean they're gonna build it two more times like their other engineering projects?

Sat, 05/23/2015 - 08:35 | 6124182 GMadScientist
GMadScientist's picture

Nobody told Li Hejun that stock buybacks are how you unload big blocks on the sly? Heh.

Sat, 05/23/2015 - 08:50 | 6124211 d edwards
d edwards's picture

serves him right. guess HE was the greater fool.

he'll just ha e to get by on a meager $14  billion.

Sat, 05/23/2015 - 09:11 | 6124245 GMadScientist
GMadScientist's picture

Paper billionaire == world's tallest midget.

Sat, 05/23/2015 - 08:51 | 6124214 New_Meat
New_Meat's picture

Leo can't be reached for comment.

Sat, 05/23/2015 - 09:14 | 6124246 Omega_Man
Omega_Man's picture

China and Russia should print some money and do this with 16 major stock in the US markets... sell sell sell... 

Sat, 05/23/2015 - 09:25 | 6124266 Jack Offelday
Jack Offelday's picture

The take-home message is: "you can't sell a halted stock" 

Sat, 05/23/2015 - 11:00 | 6124475 headhunt
headhunt's picture

Does not matter what you are selling, if people don't want it you are F'd

Sat, 05/23/2015 - 11:39 | 6124556 Last of the Mid...
Last of the Middle Class's picture

Let it henceforth be known as the techie shuffle. Tech stawk smoke and mirrors until someone figures out it's all B.S. Use to be stock boiler rooms, now the g'ment helps with a little QE since no one is buying anymore. SOSDD  Anyone out ther Tim Cook?  Iwatch???? i'm just sayin

Sat, 05/23/2015 - 12:59 | 6124708 Rusputin
Rusputin's picture

From $30bn to $14bn... He's really going to have to start cutting back his expenditure...

Maybe he will have to get used to buying one or two countries a year from now on!

Serves him right for being so darned greedy ;-)

Sun, 05/24/2015 - 10:54 | 6126709 Tyler Durden
Tyler Durden's picture

Of that $14bn, almost all is locked up in the suspended stock. And once the banks demand to be made whole, he will have negative equity. So no, he won't be buying any countries.

Sat, 05/23/2015 - 14:45 | 6124925 Chuck Knoblauch
Chuck Knoblauch's picture

Cry me a yellow river of tears.

https://www.youtube.com/watch?v=qi1npkqifnE

Sun, 05/24/2015 - 16:00 | 6127437 Ago Solvo
Ago Solvo's picture

I guess no one heard?  He may be richer than he was before.  Supposedly he shorted his own stock the day before and made out richer than he was.

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