Carter, good point! I had hoped that was clear from theStreet's article.
Interesting to me that CNBC didn't make any comment here on the legality like they did with the Memorial Day Massacre.
CNBC:
Ron: It is Irwin Jacobs versus the short in Conseco. David Faber has the story. This is not of course Irwin Jacobs of Qualcomm.
David: No.
Ron: Irwin Jacobs of 10 20, years ago.
David: From the '80s Ron. Battles between shorts and longs have long been a feature of Wall Street. In the case of financial services company Conseco, the battle has been fairly intense over the last year, as the company suffered significant losses, fired its old management, and hired a very well-regarded CEO. Today, that battle reached a new low, or high, depending on your perspective, when a large Conseco shareholder used a large "Wall Street Journal" advertisement to advocate an orchestrated short squeeze in Conseco shares. The shareholder is financier Irwin Jacobs, who owns close to 5% of the company's stock, a position he purchased prior to the appointment of former GE Capital CEO Gary Wendt to be Conseco's chairman and CEO. Jacobs tells me even before Wendt's coming on board, he believed Conseco's liquidation value was between $11 and $13 a share. That put him at odds with other investors, who believed the company might be headed for bankruptcy. With Wendt now firmly in control, Jacobs believes Conseco has a leader with plenty of bullets in his holster who can engineer a complete turnaround for Conseco. The stock price has reflected this optimism, moving up substantially since Wendt's appointment. As for the ad, in it, Jacobs says plainly that by his estimation, over 63 million shares of Conseco have been sold short. He advocates that individuals who hold the stock in brokerage accounts demand it not be lent out or switch to another broker. He also is hoping that institutions that lend stock they own will realize they are hurting their own interests. The money they make from lending shares does not outweigh the deleterious effect. Shortsellers tell me they've never seen anything like it. I hasn't had a positive effect on Conseco stock price or affecting ability of short sellers to borrow shares. Traders tell me, the borrower remains easy, the stock is down 11%. Jacobs tells me it is about more than engineering a short-term pop in Conseco's price by forcing those who borrow shares to short to give them back. Stock will reflect that. Jacobs agrees, but he says that by acting now, he hopes to stem any short term slide in the stock price, though that if Conseco seeks to issue equity, it can do so with higher price less through he says the ad will run this weekend in "The New York Times" and next week in "The Journal." Having made his plans clear, he will be able to freely discuss them with other shareholders. He said he isn't bothered by the lack of effect as yet but hopes to see impact within 10 trading days. Now Jacobs says he didn't tell Wendt about the ad until set to run. Mr. Wendt hasn't returned calls. Conseco is expected to issue equity, equity which would dilute current shareholders such as Jacobs while it strengthens the company capital structure. Now, Wendt wouldn't be diluted, he has options on 10 million Conseco shares, which vest next 5 years. 580 is the strike price, he doesn't own shares, and in fact also has anti-dilution rights in those options. So, he can do whatever he sees fit to fix Conseco's capital structure without suffering dilution and benefit if the move proves effective. Ron, back to you. |
