Margin--P. Goodman, The Post: Margin Calls Show No Mercy...
washingtonpost.com
>>>The dreaded "margin call" has become increasingly familiar to thousands of traders who have sunk borrowed money into stocks in hopes of making fast profits, only to have creditors demand repayment when the market heads south.<<<
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sec.gov
>>> Are you aware that your brokerage firm can sell your securities without notice to you when you don't have sufficient equity in your margin account? <<<
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Full text.
>>> Ebbers Forced to Sell Low
By Peter S. Goodman
Washington Post Staff Writer
Friday , October 6, 2000 ; Page E01
Amid the continuing plunge of once highflying telecommunications stocks, an emblematic victim has been added to the roster of pain: Bernard J. Ebbers, chief executive of WorldCom Inc., the long-distance telephone and Internet giant, last week filed to sell 9 percent of his company holdings to keep pace with his deepening personal debt.
In a Sept. 28 filing with the Securities and Exchange Commission, Ebbers declared his intent to sell 3 million shares, or about $79 million worth of company stock. A company spokeswoman said he was forced to sell to pay off a loan he had taken to buy the shares four years ago.
The dreaded "margin call" has become increasingly familiar to thousands of traders who have sunk borrowed money into stocks in hopes of making fast profits, only to have creditors demand repayment when the market heads south. But it's a particularly tough turnabout for Ebbers, an outsized man who turned a Mississippi start-up into a global behemoth by craftily executing one takeover after another.
"He's always been a big believer in the company, so it's not surprising me that he levered up by betting on his own stock," said Richard Klugman, a telecommunications analyst at Donaldson Lufkin & Jenrette in New York. "Bernie has a high majority of his net worth in WorldCom. This is not the kind of thing that a typical investment adviser would encourage you to do, to have all or most of your eggs in one basket, but that's fairly standard behavior for an executive at an entrepreneurial firm."
For Ebbers, the debt crunch caps a year he would probably rather forget. This summer, regulators on both sides of the Atlantic doomed his most ambitious deal ever--his proposed $129 billion takeover of Sprint Corp., the nation's third-largest long-distance company. Antitrust authorities cited concerns that the deal would hurt consumers and concentrate too much Internet traffic in the hands of one corporation.
Since then, WorldCom's shares have lost roughly half their value as stocks throughout the industry have plummeted. Investors have grown spooked that the telecommunications world will require ever greater infusions of capital as it expands networks in an era when every company is retooling for the promises of the Internet.
AT&T Corp. stock has lost almost half its value this year, as it has sunk dollars into an attempt to turn its cable television properties into conduits for the high-speed Internet. The company is now considering shedding its residential long-distance business, which is losing market share steadily.
AT&T is not alone it getting battered on the stock market; Sprint stock yesterday closed at $26.88 a share, near its 52-week-low.
Upstarts that only months ago still were darlings of the investment world--Teligent, Covad Communications and NextLink, now renamed XO--have plunged by even greater degrees.
Ebbers's difficulties could hardly have come at a worse moment. Yesterday, WorldCom's stock closed down nearly 8 percent at $25.94.
The WorldCom spokeswoman said she did not know whether Ebbers had yet parted with the shares, though he is committed to selling all of them.
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