Well, I just spent 30 min typing up the relevant excerpts before realizing it probably wasn't kosher just posting on a board. I'm not inclined to invest another 30-60 min trying to paraphrase what he said so well himself. But thanks.
well i wasn't implying that you paraphrase the whole text. just throw out a couple of bullet points.... takes a minute or two.
Any one know what would happen in this situation: Say a float is 10M shares and buy out offer comes in to take company private. Insiders own 8 million, 2 million retail, 2 million short, and 4 million naked short. Presumably once the company buys up the remaining 2 million that they don't own, thus securing the whole float that is it. What happens to the the 4 million fake shares that have been shorted? Do they just get off scott free? If so seems like a way to beat/cheat the system for little risk?
The 4 million naked short, implies 'someone' bought them, so the seller could be short. I'd guess the long would try to sell his shares to the buyout. Novel approach to have more shares tendered than the company ever issued!
But isn't the whole point behind the naked shorts that no one did buy them which ish why they are "naked". There is no party on the other end of the short so if the company does get bought out then the naked shorts dissappear.
No. Somebody did buy them. They're naked 'cause the seller never borrowed them in the first place. Thats like me selling you the Brooklyn Bridge. It's not mine to sell in the first place. Upon the tendering their shares, all those buyers are going to effectively demand delivery from the shorts. The shorts are then forced to buy shares wherever they can find, at whatever price they can find. That's not good, for shorts that is.
story on naked shorting here: http://www.thestreet.com/p/tech/kevinkelleher/10238633.html More recently, the controversy has moved to naked short-selling. Naked shorting is in essence make-believe short-selling. In the same way kids play doctor without the medical equipment, naked shorters sell unborrowed stocks -- stocks that no one has borrowed and possibly never will. The SEC allows naked shorting in two cases: to maintain liquidity in hard-to-find shares and for anyone who shorted unborrowed shares before 2005. That second exemption has generated its own share of controversy.
MAD, MAD, MAD, MAD MILKEN Robert Lenzner, Globe Staff 1,335 words 2 April 1989 The Boston Globe THIRD A1 English (Copyright 1989) NEW YORK - Call Michael Milken the "Rain Man" of Wall Street. It is fitting that the superstar Milken should have been indicted on the eve of this year's Academy Awards: The "junk-bond king" made the greatest fortune in Wall Street history by dint of his perfect memory for numbers. And it is strangely appropriate that this "Rain Man" -- who made $550 million in 1987 alone -- will be arraigned here next week, missing for the first time in recent years the "Predators Ball," the annual get-together of the fraternity of junk bond dealers and takeover artists that is scheduled to be held in Beverly Hills. For though Milken was by profession an investment banker, he also was in many ways a creature of the show-business culture of Southern California. Milken, the antiestablishment outsider who lived a workaholic existence, often spoke in Hollywoodese, too. His aim, he said, was to be Luke Skywalker, the hero, rather than Darth Vader, the enemy, of "Star Wars" fame. In 1986, to sell the financial services of Drexel Burnham Lambert, Milken paid the pop star Madonna a packet of money to make a 10-minute promotional film that has since been retired from distribution. Madonna recruited Ivy League business school graduates and Japanese bond buyers by singing her theme song "Material Girl" with lyrics suggesting that wealth and a flashy life waited at Drexel. The production symbolized the crazy, colorful greed of the mid-1980s. Loaded with flashy jewelry and provocatively dressed, Madonna sang: "I'm a Double B girl in a high yield world, "Drexel, Drexel, Drexel." Interspersed with Madonna's prancing were shots of Milken's most glamorous clients, Steven Ross, Warner Communications chairman; Rupert Murdoch, the newspaper publisher; Steve Wynn, gambling casino proprietor; and Ronald Perelman, chairman of Revlon Corp. All were conspicuously absent from the full-page "Support Milken" ads taken out by the indicted deal-maker last week. So were Milken's junk bond crowd from Southern California and the arbitrageurs who paid for their Easthampton beach houses with the profits from Milken's deals. Henry Kravis was not listed either, because Milken stands accused of telling Ivan Boesky to buy shares of Storer Broadcasting common stock during the second week of July 1985. Milken knew Kravis was about to raise his bid for the communications company. Milken did not even split the profits with Boesky on this one, according to the indictment. Nor was Ted Turner on the list, though he paid Drexel $66 million in 1985 to acquire MGM/UA. That is because Milken has been charged with tipping Boesky off to the Turner Broadcasting deal for MGM/UA in August 1985, which netted Drexel more than $3 million, according to the indictment handed down last week. The charges brought last week in the US attorney's 108-page indictment could cost Milken about $5.5 billion if he is found guilty. They raise the question of who Milken the superstar really is: a persecuted restructurer of America, an antiestablishment genius, a grandiose crook, a naive financial saint, or some odd mixture of all the above and more. Though Milken has packaged himself as a man not interested by money, he never reduced his unparalleled take from Drexel -- 30 percent of the revenues he created, or more than $1 billion by the time he was 41 years old. The devoted family man who is supposed to be more concerned about his children's welfare than a leveraged buyout left for the office at 3:30 a.m. and often returned late in the evening. The man who wanted to reeducate American children said he trusted the good intentions of the likes of Victor Posner, Ivan Boesky, Meshulam Riklis and Bennett Lebow. He tells friends he believes "in the good side of every one -- that people are basically good," said Judith Wolin, an old Califiornia friend who has known Milken since they were classmates in third grade. "Michael always looks at the glass as half-full," Wolin said. "He is a believer in people's potential." The more famous Milken became, the more private, isolated and mysterious he seemed to be. Along the way, he became larger than life. Secretly, he must have enjoyed the notion that he alone created 75 percent of Drexel's profits and was in absolute control of Drexel, though he was neither an officer nor a manager of the firm. As Milken's reputation grew, he began to be called the new J.P. Morgan. He was the puppet master, the kingmaker of the takeover craze. "Everyone knew he pulled the strings. Everyone knew he was in control of Drexel, maybe the world," said a good friend and admirer. "This is the way he got himself grandiose." "Why should greed have a cutoff point?" asked a psychiatrist with several Wall Streeet investment banker patients. "This was in excess of anything reasonable." Milken was not grandiose in the thesaurus sense, which uses "pompous, bombastic, flashy, flamboyant, ornamental and flowery" as synonyms. He was not interested in fast cars, fast women, big yachts and outsized palaces. Because he did not seek out the spotlight, Milken became even more powerful, looming gigantically over a money-mad era. When people like Business Week start calling you the new J.P. Morgan, it is easy to believe. And Milkens' secret accretion of wealth from the ages of 36 to 42, which is believed to have reached the $1 billion to $2 billion area, encouraged a hugely inflated notion of himself, a close friend and fellow investment banker said. "Before Giuliani, before the scandal broke, using inside information was common practice on Wall Street," said this Milken friend. "Mike thought this was the way you operated. I don't think he said, 'I'm above the law.' I don't think he ever preceived there was a line there to cross." The Milken believers also do not regard their hero as a crook. They see him as a man being persecuted by the establishment for having dared both to challenge it and to restructure a good deal of it. D. William Carey, chairman of Town and Country Jewelry, a Chelsea, Massachusetts concern with $425 million in sales, calls Milken a "caring, sensitive businessman," but he recognizes that "any superstar makes enemies. All superstars become targets." Milken was the savior of many medium-sized entrepreneurs who could not borrow unlimited money from their banks. Samuel Krasney, vice chairman of Banner Industries, the largest distributer of aircraft equipment in the world, said he formed "an emotional bond" for the "brilliant, earthy, low-key, intensely directed" young banker whom he described as a combination of Beethoven, Toscannini, and Heiftez -- a composer, conductor and violinist rolled into one. Town and Country's Carey added: "None of the other major-tier firms would give me the dirt under their fingernails. Mike found a way to get me money." Milken's greatest admirers at Drexel Burnham are bewildered by the charges against their champion. One said one-third of the allegations "made no sense," another third were "improbable" and the last third "made sense if Mike was a crook." The financial house that Milken built is hung on his petard. It cannot entirely shed Milken or else its other stars and its clients will leave. So Drexel will pay his enormous legal bills, despite his personal wealth, which rivals the firm's capital. This is yet another note of awkward public relations that will not work will for the image department. Little does Fred Joseph, president of Drexel Burnham, realize that many of his clients are shopping for a more respectable name to be their investment banker. So much for the Joseph plan to sweep past Goldman Sachs into the high class bracket of Wall Street. So much for Wall Street's "Rain Man." LENZNE;03/31 NKELLY;04/03,21:03 WILKEN02 Caption: PHOTO
Lol brain not working today. Thanks for setting me straight. So even if the company stops buying whne they have the legitimate shares the other buyers will have a case against the naked shorts to recover damages equivalent to the buyout price. Hmmm, in other words naked shorting really is plain fraud selling the rights to something you do not own or have the right to sell (even if you them obtain the rights that is immaterial you have still committed fraud). Seems like one hell of a risk to take to make some money as it isn't just $losses you are looking at if things go wrong but jail time. The Rocker firm have been around a long time, are they the types who would risk jail time for a profit? What is their history?
I think we now know why Mr Byrne picked the Star Wars reference. HE doesn't like STAR WARS, but Mikey does. By the way, his defense of his position reminds one of the hedgies defending theirs.......... I always liked history. Create New Briefcase Retrieving article(s)... Article 76 ROB Still a hero to many, Milken continues to support junk bond market GAIL APPLESON Reuter News Agency 1,060 words 23 June 1989 The Globe and Mail B8; (ILLUS) English All material copyright Thomson Canada Limited or its licensors. All rights reserved. NEW YORK U.S. prosecutors are calling Michael Milken Wall Street's public enemy No. 1, but as he awaits trial on charges that could put him in jail for years, the once powerful financier cannot believe what is happening to him. "You wonder who they are writing about," he says, referring to the flood of news reports of his alleged crimes. "After spending your whole life trying to help people, you can't believe it." Unlike Ivan Boesky, the admitted felon who became a pariah in the financial world, Mr. Milken remains a hero to many, supported by those whose deals he once financed, others who insist he is a genius and some who question the government's drive to "clean up" Wall Street. "As far as I am concerned, Michael walks on water," said Reginald Lewis, chairman of TLC Beatrice International Holdings Inc. and one of the most influential black businessmen in the United States. Mr. Milken resigned from New York-based Drexel Burnham Lambert Inc. to start a financial consulting firm, but his departure was a foregone conclusion. The investment bank had agreed to fire him as part of its pact with the U.S. government settling massive securities fraud charges involving billions of dollars. Mr. Milken had been on leave of absence from Drexel since March 29, the same day he was indicted by a federal grand jury on a wide range of fraud charges. The government has charged him with 98 counts of racketeering and securities fraud. Prosecutors said he cheated clients, manipulated the marketplace and even tricked a corporation into being taken over. Mr. Milken, who will turn 43 on July 4, spoke to Reuter during a two- day visit to Indianapolis, his first in-depth interview since his indictment. He said he feels he has been misrepresented. He was in Indianapolis for a meeting of "100 Black Men of America," where he was honored with the Marcus Garvey Award for Economic Freedom. Mr. Milken was the first recipient of the award, named for the black nationalist leader who died in 1940. He arrived at the 6:30 a.m. interview in the lobby of the Westin Hotel, casually dressed and looking boyish in a yellow Polo sports shirt and tan chinos, but later donned a white shirt and navy blazer for a hectic day of meetings and public speeches. Not surprisingly, Mr. Milken says he is "disappointed" at being forced to quit Drexel, the investment banking company he turned into a Wall Street powerhouse. He is unwavering in his support of junk bonds, a market he originally created to help businesses find the money they needed to grow. Only later did the bonds become the favorite weapon for the more controversial corporate raiders. "High-yield bonds are freedom for companies in need of long-term financing," Mr. Milken said. Although these companies have proved to be good investments, Mr. Milken says there is still a prejudice against junk bonds. He criticized a vote by the U.S. House of Representatives that would prohibit savings and loans institutions from buying such bonds. "What you're saying is that small companies shouldn't be allowed to do the same thing as large companies," he said. He also defends the more controversial use of junk bonds - financing the merger-mania that has swept Corporate America. "We're all upset with change. It's like being a gardener: You have to prune the bush to make it grow. It's painful, but sometimes things have to change. "The fact is, though, there are more people employed in this country than ever before." Despite the charges, Mr. Milken has received more than 100 calls since announcing the formation of his new business in Los Angeles. The calls have come from small and medium-sized businesses, which have traditionally had a difficult time finding capital. "It's like the movie Star Wars, when Princess Leia's planet blows up and Obie-Wan Kenobi feels the force of all these voices calling for help," said Mr. Milken, who frequently makes analogies to Hollywood films. "I feel like there are thousands of companies out there asking for help. You need some vehicle to take care of their needs." Mr. Milken's International Capital Access Group is meant to provide advice to individuals, communities and companies, emphasizing opportunities for employees, minorities and unions. The government is painting a picture of a Wall Street shark who wanted to make huge sums of money - whatever the cost. And some news reports have portrayed him as an aloof miser whose philanthropic efforts were only public relations ploys. Mr. Milken earned a total of $1.1-billion (U.S.) from 1984 to 1987, including $550-million in 1987 alone. But he does not fit the stereotype of a money-hungry financier owning many homes, yachts and sports cars. Instead, he has just one house, is married to his high school sweetheart, and says he has given hundreds of millions of dollars to charity. "Did you see Field of Dreams?" he asked, trying to explain himself. In Field of Dreams, a sentimental film fantasy, a character makes a noble choice that forces him to sacrifice his dream of becoming a baseball player. "I saw a person denied something he wants to do most in his life," Mr. Milken said. "I never thought I would work anywhere else," he added. He joined Drexel in 1970, right after getting his master's degree in business administration from the University of Pennsylvania's Wharton School. "He's got smart genes," said Mr. Milken's wife, Lori. "He can't fix a radio, but in his field, he can do anything." She said the family is trying to maintain a normal life. In explaining to their three children what is happening to their father, she said: "I remind them about history, about what has happened to men who've caused radical change." As for her husband: "He's up and down depending on what's happening; if what he reads is bad and wrong. "I go from day to day now. I've become Scarlett O'Hara. I can't think about the future. I'll think about that when the time comes." Document glob000020011116dl6n00r31 More Like This