The 60 Minutes piece on Biovail’s lawsuit against Gradient and SAC aired this evening, and unlike the Dateline whitewash, it actually had some meat on its bones.
You can read a transcript of the show here. I actually recommend reading it, as it has some great comments.
What was noteworthy is that for the first time, an elaborate form of stock manipulation was highlighted in a manner that was relatively simple for Joe Public to grasp – billionaire bad guys are doctoring news and front-running it, in order to profit from a company’s declining stock price. Not real difficult to get one’s head around. That the hedge fund in question declined to appear is interesting. Not surprising, but in keeping with the advice that if you are up to no good, try to say as little as possible. Not that we know whether the allegations in the Biovail suit are true - yet. But we will, and it sounds like the Biovail attorneys are loaded for bear (sorry, couldn't resist).
The affiants were convincing, and the likelihood that they are all cooking up a fish story diminished to next to nothing.
The story didn’t touch on naked short selling, but then again, the lawsuits brought against SAC and Gradient and Rocker don’t mention naked short selling, so it isn’t particularly surprising that the show didn’t delve into that territory.
I wonder how it feels to see your research firm as one of the bad guys in a 60 Minutes episode? I mean, it’s not like you can just pretend that didn’t happen. Has to bring home the reality of the situation.
I particularly enjoyed the CT AG’s statements about how little is known about the hedge fund industry, and how little regulation goes on.
What would I have done differently? I probably would have done a little animated explanation of exactly how the manipulation works, and given a 2 minute explanation on what techniques are common – including naked short selling.
Still, this marks a huge turning point in the media’s treatment of issues that are important to us all – it was only a little over a year ago when NCANS was formed, and I started blogging. This seems like a major shift from the prevailing sentiment from a year ago.
60 Minutes is now running pieces on stock manipulation by hedge funds who are colluding with the same research group that was attacking NFI and OSTK with yet another hedge fund – who is also being sued.
It’s a start.
I’m sure that the usual cast of lisping morons will be advancing the hackneyed, provably false wisdom that all companies need to do is just keep operating well and stock manipulations won’t be bale to hurt them – ignoring the experience of companies like NFI that have been delivering wildly successful results for 4 years now, and still are trading at incredibly steep discounts to peers. Why these dolts can’t see the obvious is unknown, although one has to suspect that at the bottom of virtually every apologist’s argument is financial gain of some sort.
The part that I found a little disappointing about the 60 Minutes piece is that they left out that it isn’t just about one research firm, but rather that captive research is one small portion of the assault strategy – they left out the coordinated media slams, the rampant manipulative trading, the vocational bashing, the hedge fund “pile on” effect, the naked short selling. One could walk away from the piece thinking that no single element or research group is important enough to affect a company profoundly. While that is true in a vacuum, what it ignores is that the research group’s negative reports are only a small piece of the whole scheme – albeit one that is visible, and thus a good place to start if you are going to use the courts to unwind and expose the whole manipulation. I wouldn’t doubt that it becomes obvious as discovery proceeds that these reports served as a trigger mechanism to alert like-minded short sellers that a new company was going to be gamed. That’s certainly how it appears to me.
But back to the show, and what it represents – the first time that this sort of collusive scheme has been addressed in the mainstream media. Let’s hope that we see more of this.
I would encourage everyone to send 60 Minutes an email congratulating them, and further suggesting that they do a treatment on naked short selling. Can’t hurt, and one never knows…