IB loses $28 million buying MF Global Stock

As an IB customer I don't like this one bit. I always knew IB had an active market marking division, but I assumed it was high frequency trading with minimal chance of catastrophic lose.

Now it turns out they blew $28mil trying to bottompick MF global stock. Note to Peterffy: IB is not your personal hedge fund.

http://www.bloomberg.com/news/2011-11-08/peterffy-bought-8m-shares-as-mf-collapsed.html

 

Its the other way around. IB is a market maker, they also have a brokerage division.. (around 65-75% of their profit over the last 5 years where from market making)

 

It doesn't sound like market making to me.
It sounds like straight up gambling.
Maybe this is why IBKR is one of the worst performing stocks for 5 years in a row.

 

Not a smart move by IB.

IB does invest in other companies. In October, 2010 IB purchased 2,567,522 shares (6.3%) of TradeStation for an average price of $6.22. They made a nice profit when TradeStation was taken over at $9.75.

 

So we learn that Peterffy treats IB as his own personal hedge fund when he feels like it.
“I started to buy the stock as it went down”
“You win a few, you lose a few”

 

I just logged on to my IB account and created a customer support ticket that expressed my displeasure about this recent trade and asked that the message be forwarded to IB managment. I suggest others do the same.

 

I would trust Peterffy to invest some of my money. I bought TradeStation based on Peterffy's purchase and made money. He just got blindsided by MF Global like many investors and clients.

 

What is the big deal? IB almost dropped several *hundred* million buying MF Global but were the first to detect that something was rotten.
He had been working for years to do a deal with MF Global and acquiring the common stock was part of his strategy apparently. Be glad that you have an account with IB and there are still old school people like Peterffy in the futures industry.

 

I was glad when the deal fell through. Getting in bed with lifetime hustlers like Corzine without 110% due diligence is a dangerous move.

Theoretically ,there was value there, but buying a co from Scum is not a good idea. See Countrywide.

 

You need to differentiate between the different affiliates of IBG. IBLLC is the brokerage and would not be the entity making the investment.