MF Global Whacked Again
Posted by David Gaffen
If there’s a template out there on how to lose the confidence of investors (and by now, there probably should be, given the myriad examples), MF Global seems to be following it to a “T.”
The company is coming up on its one-year anniversary as a public company to find that it doesn’t have a lot of value left in its stock, having lost more than 75% from its offer price of $30 a share. Wednesday, the stock declined by 40% after the company lowered revenue expectations and said short-term credit spreads will hurt interest income.
This only piqued analyst interest Wednesday, such as Deutsche Bank analyst Rob Rutschow, who wanted to know how large the losses are, and “what investors can expect going forward.” Greg Newton of the Naked Shorts blog was more scathing, saying “several factors appear to be driving MF Global’s headlong rush to incorrigible not-for-profit status.”
However, just as Bear Stearns Cos. and Lehman Brothers Holdings Inc. did in recent times, the company has opted to follow the advice of Polonius, who counseled that “brevity is the soul of wit,” instead of that of Richard Nixon, who laid it all on the line in the famous “Checkers” speech.
MF Global issued a press release this morning advising the market “that our volumes and associated transactional business continue to fare very well as we continue to benefit from the exceptional volatility in the markets in which we operate.”
They added that the decline in interest income in May is regarded as “short term in nature and the result of the current positioning of client assets which are largely in overnight government and agency securities. The company would expect interest income to return to more normal levels as we take advantage of the already higher rates.”
That was it. So everything’s great. Nothing to see here. Perhaps this is the case, and the brief decline in market share will be just that, brief, and there will be no long-term fallout from its wheat-trade-related disaster earlier in the year. But the firm still has work to do to get investors back on board.
As the experiences of former executives Alan Schwartz (late of Bear) and Erin Callan (of Lehman) suggests, a brief statement attempting to assure investors that all is well is often an entrée for more investors to sell — which is what’s happening to MF, down 7% in early trading. |
