JEF is trading $12.20, up 1.6% with IV30™ down 17.7%. The LIVEVOL® Pro Summary is below.
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Jefferies Group, Inc. and its subsidiaries operate as securities and investment banking firm.
I last wrote about JEF on Tuesday. You can read that post here:
Jefferies Group (JEF) - Do We Know... Everything?
Here's a quick snippet from that post to summarize:
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The news driving the vol and stock is quite simply Europe and the suspected exposure the firm has to it. With the bankruptcy of MF Global, the public is looking for the next potential disaster. Here’s a snippet from a great article published by Bloomberg.
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[JEF] fell as much as 14 percent today as investors renewed their focus on Europe’s financial crisis, prompting the investment bank to say it has “no meaningful exposure” to debt issued by Portugal, Italy, Ireland, Greece and Spain.
[…]
Jefferies, which arranged $325 million of bonds for MF Global in August, said yesterday it has less than $9 million of exposure to the failed firm’s debt securities.
Source: Jefferies Slides as Investors Focus on Impact of Europe’s Sovereign Debt, written by Laura Marcinek
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The stock actually hit as low as $9.79 on 11-3-2011 (aka yesterday). The IV30™ reached 111.69. Today the company released what the market has perceived to be substantive news stating it only held $9 million in net positions (a trivial amount). It was a statement from the Chairman and CEO after releasing country by country positions (aggregated long and aggregated short positions by country):
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Long Short Net Cash Futures Net Total
——— —– ——- ——– ——- ———
Italy 2,086 (2,011) 75 (100) (25)
——— —– ——- ——– ——- ———
Spain 191 (209) (18) - (18)
——— —– ——- ——– ——- ———
Ireland 110 (80) 30 - 30
——— —– ——- ——– ——- ———
Portugal 20 (16) 4 - 4
——— —– ——- ——– ——- ———
Greece - - - - -
——— —– ——- ——– ——- ———
Total 2,407 (2,316) 91 (100) (9)
——— —– ——- ——– ——- ———
“These are fragile times in the financial market and we decided the only way to conclusively dispel rumors, misinformation and misplaced concerns is with unprecedented transparency about internal information that is rarely, if ever, publicly disclosed,”
Source: Jefferies Once More Addresses Euro Concerns, written by Mark Gongloff
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Before I comment, let's look at the market's reaction with the one day tick chart (stock on top, front month vol on the bottom).
So basically the stock popped from as low as $11.12 today and the vol has come in more than 40 points in Nov.
Ok, here's some... interesting observations.
1. Everything the CEO said today, he already said yesterday, in rebuttal to a downgrade from Egan-Jones. What I'm sayin' is... we already knew this information. Details:
Egan-Jones was out fast with a ratings downgrade (these are investor funded ratings not paid for by the actual debt issuer (hmmm... that sounds... reasonable):
“They claim it’s beautifully hedged,” Mr. Egan said. “Our view is that we’re skeptical until we see complete proof of that. In the past, the hedges haven’t been as perfect as originally presented. We don’t know how those shorts are set up and whether they completely offset their $2.7 billion [exposure].”
Source:WSJ: Egan-Jones Defends Its Downgrade of Jefferies, written by Jeannette Neumann
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2. Not to be a S* disturber, but you gotta love the honesty of this part of the quote: "[...] we decided the only way to conclusively dispel rumors, misinformation and misplaced concerns is with unprecedented transparency about internal information that is rarely, if ever, publicly disclosed."
I mean, isn't that the problem? That transparency is "rare, if ever" to be had from Wall St? Shouldn't public companies always be vigilant to "conclusively dispel rumors, misinformation and misplaced concerns?"
Bottom line, I have the same conclusion as before. If JEF comes out and claims there is one more dollar of risk, or one hedge isn't quite what they said, this thing could be cut in half in 30 seconds before it halts.
Just to be clear, I'm not saying this is going to happen, I'm just noting the tenor of the market.
One other thing, as helpful as a table of numbers are (LMFAO), if the CEO really wanted to "dispel rumor," why not just show the entire positions -- security types, names, details, etc? Hey, it's for the survival of the company. I mean, why wouldn't he do that asap rather than wait for the market to close?...
Yeah... Why wouldn't he?...
Hopefully the info JEF discloses AMC sways the market in the same way the announcement of the disclosure has.
This is trade analysis, not a recommendation.
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did you happen to see that big put spread traded right after positions were released?
ReplyDeleteI did, it was the Dec 11/6 1x2 12,500x.
ReplyDeleteJust to be fair, there are any number of reasons a company might not disclose the details, not the least of which could be facing further claims in litigation predicated on having "misled" the market with less than complete disclosure. Blame it on regulations, and the lawyers, but absent spilling the entire alphabet, there will always be someone who claims (either this time or next time) that you should have (not have) told the world we were (counterparties/guarantors/trustees/adminstrators/etc etc). Not saying disclosure is bad, just saying that the law is currently making it very hard to avoid being "a little bit pregnant".
ReplyDeleteFair enough, but to have multi-billion dollar bets long and short in Italy, which is likely the next massive issue in the EU, and to simply "disclose" the amounts of the positions is hardly "dispel[ling] rumors, misinformation and misplaced concerns." No?
ReplyDeleteDidn't they say they are going to release cusp level details after the market close?
ReplyDeleteI believe they did say they would provide more detail. Hopefully the market digests the real info in the sme light as they did the fluff. We don't need another bankruptcy.
ReplyDeleteWhat they said is that they are going to release cusip level holdings in the securities. It seems like you chose to gloss over that fact in writing this post.
ReplyDeleteI just said that I hope the real information is digested in the way the market assumes it will be. No glossing -- it hasn't been disclosed yet.
ReplyDelete