Chapter 569 Veto
On October 13, the U.S. Treasury Department announced that it would help major financial institutions set up a fund (super fund) worth $100 billion to purchase distressed mortgage securities.
At this time, the United States has realized that if the plunge in CDO bonds continues, their investment banks will continue to lose money, which may eventually cause greater impact.
On October 23, the American Bankruptcy Association announced that the number of consumers who filed for bankruptcy in September increased by 23% year-on-year, nearly 69,000!
As soon as this data was released, the securities market responded immediately, and the Dow Jones Industrial Average and the Nasdaq Index both fell.
The next day, on October 24, the world's top brokerage firm, Merrill Lynch, announced that they lost $7.9 billion in the third quarter of this year due to the subprime mortgage crisis!
The day before, Japan's largest brokerage firm Nomura Securities also announced a loss of $620 million in the quarter.
On October 30, UBS, the largest bank in Europe by assets, announced that due to losses in subprime-related assets, the third quarter saw its first quarterly loss in nearly five years, reaching 830 million Swiss francs!
On the same day, Merrill Lynch announced on October 30 that the current CEO Stan O'Neill "decided to retire immediately". Obviously, his resignation was because in the third quarter of this year, Merrill Lynch's assets in the subprime mortgage-related field were impaired by $7.9 billion, and the quarterly loss was as high as $2.24 billion. This was the first quarterly loss in Merrill Lynch in 6 years and the worst performance in the company's 93-year history.
What made Merrill Lynch's shareholders angry, and what made Baron very happy, was that Merrill Lynch's stock price had shrunk by 30% this year - this means that they have made huge profits by shorting the company's stock.
Of course, it is not only Merrill Lynch that has seen a sharp drop in stock prices, but also Thomson Group.
Since mid-October, when IE Fund began to increase its shorting of Thomson Group, the company's market value has fallen by more than 20% from its previous high, and its stock price has begun to hover around $37.
At first, the Thomson family just thought that the company's stock price was the result of the overall stock market correction after the Dow Jones Industrial Index reached its historical high.
But soon, they found that something was wrong. It was obvious that someone was selling a large number of Thomson Group's stocks, causing their stock price to fall faster than other companies in the same industry.
Thomson Group itself is engaged in the sales of financial information, so after investigation, they soon found out that their stock price fell deliberately.
Now, they are facing a choice - in fact, they don't have to choose at all. The acquisition of Reuters Group is their most important thing at the moment, so at this time, Thomson Group certainly does not want to affect the acquisition because of its own stock being shorted.
So Thomson Group quickly issued an announcement, saying that the company's operations are normal and there is no undisclosed news, and announced that they will use $500 million to repurchase its shares, and do not rule out the possibility of adding more funds in the future to stabilize the stock price.
You know, Thomson Group has sold its education-related industries one after another and obtained more than $8 billion in funds.
But when using these funds, the Thomson family will also have concerns.
Because first of all, these funds belong to the Thomson Group. If these funds are used to repurchase stocks, then these stocks can only belong to the Thomson Group in the end, not the Thomson family. Often, when such companies repurchase stocks, they will be destroyed to reduce the total share capital of the group. Correspondingly, the corresponding value of the reputable Thomson stocks will also increase, which will naturally give the market confidence and stabilize the stock price.
But in this case, it is not only the Thomson family that benefits, but all shareholders.
Another aspect is that these funds are prepared by the Thomson Group to acquire the Reuters Group. If they are used too much and cannot be replenished, it will inevitably affect the acquisition of the Reuters Group.
If the Thomson family comes to repurchase stocks, they can't come up with so much money at once...
It's still very entangled.
But later, the situation continued, and the Thomson family could no longer hesitate. You must know that at the beginning, the IE Fund had already bought $1 billion of Thomson Group shares in advance, and before that, it had sold them all when the overall stock market was down.
Next, IE Fund used the funds obtained from the sale of stocks to intervene in Thomson Group's stocks from the market and continued to sell them, causing Thomson Group's stock price to continue to fall, and the decline was much greater than those stocks that did not seem to be affected by the subprime mortgage crisis...
Similarly, the decline in Thomson Group's stock price also affected Reuters Group, making the merger of the two parties fall into doubt again.
Because Reuters Group was not spared either, its stock price also fell by more than 10% during this period. Although its decline was far less than that of Thomson Group, it caused a negative impact on the cooperation between the two parties.
Many shareholders of Thomson Group asked Thomson Group to increase its acquisition offer for Reuters Group after the Reuters Group's stock price fell sharply. After all, the Reuters Group's stock price has fallen sharply, which is equivalent to the loss of their rights and interests in the stock exchange outside the cash acquisition.
Similarly, within the Thomson Group, although the Thomson family's holding company holds more than 70% of the shares of Thomson Group, other shareholders have also proposed to reconsider the acquisition of Reuters Group. Because the group's stock price is unstable at present, and the Reuters Group's stock price is also falling, forcing the merger of the two parties may even be implicated, thus affecting the operating conditions of Thomson Group.
In addition, the market regulators in the United States and the United Kingdom have been slow to make a final antitrust ruling on the acquisition, which also requires Thomson Group to focus most of its energy on the acquisition.
So even if the Thomson family used part of their own funds to buy Thomson Group's shares, and later used $500 million of group funds to repurchase the shares, it still did not stop the trend of stock decline. After a slight rebound, it continued to enter the downward channel.
After all, with the overall downturn in the stock market, investors have become more cautious, and many people have also realized the risks involved. Therefore, not much money is willing to come in and follow the Thomson family to "support the bottom" - after all, before this, the share price of Thomson Group was already at a high level, who would not worry about becoming a high-level buyer?
On the contrary, there are even many Thomson Group stock holders who have begun to sell their stocks to "lock in profits", which has caused the share price of Thomson Group to fall by more than 20% from the high point 20 days ago by the end of October.
But things did not end here. On October 31, Halloween, the British Competition and Markets Authority (CMA) announced that considering that Thomson Group's acquisition of Reuters Group would affect fair competition in the industry, they decided to veto the acquisition transaction.