Post by kranker on Dec 10, 2005 17:09:10 GMT -4
Manning claims trading abuses
Auction house files complaint, seeking inquiry into 'naked
short selling'
Thursday, February 17, 2005
BY GREG SAITZ
Star-Ledger Staff
Tired of what they think is manipulation of the company's stock price, executives at Greg Manning Auctions said yesterday they filed a complaint with regulatory officials about what appears to be short- selling abuses.
The auction house, based in West Caldwell, said it has asked NASD Regulation to investigate whether the stock is being manipulated by certain investors through an illegal practice known as "naked short selling." The issue has affected hundreds of other companies.
Short selling of shares is an acceptable trading practice. An investor who thinks a company's stock is going to drop will borrow shares from a broker and sell them, with the requirement that they be bought back -- hopefully, for the short seller, at a lower price -- and returned. The short seller pockets the difference between the higher price he sold the shares for and the lower price he bought them for.
With so-called naked short selling, an investor never bothers to borrow the shares. Naked short selling is illegal on most stock markets, including in the United States.
Chief Executive Greg Manning said the company has watched the number of shares held in a short position grow steadily during the past year or so. In February 2004, about 288,000 shares had a short interest, but by last month the number had ballooned to 2.59 million -- 37 percent of the company's outstanding shares.
Manning said the company decided to act after releasing solid second-quarter results last week -- profit was up 88 percent and sales increased nearly 19 percent -- only to see shares close at $11, down $1.21 from the opening price on volume four times normal.
"We had record results and it has appeared to us there has been manipulation going on," Manning said. "The only conclusion we can come to is there is illegal shorting going on."
The day it released its earnings, the company received phone calls from several investors who wanted to short the stock, but were unable to find any available, Manning said. In addition, Nasdaq told the firm tens of thousands of shares of Greg Manning Auctions had been shorted that day, he said.
A spokesman for the NASD, the security industry's regulatory association, did not return a call for comment.
The company also said it is taking steps to be delisted from the Berlin Stock Exchange, where its stock has been listed without its consent and is being traded. Dozens of other public U.S. companies discovered they also had been listed on the Berlin exchange, which some have said is the latest venue for naked short selling.
Hillside-based Integrated BioPharma, a vitamin company, went through the same problems as Greg Manning Auctions last summer. Eric Friedman, Integrated's chief financial officer, said yesterday the stock is no longer being traded in Germany.
The business got its attorneys involved, and after about two months "it finally just kind of disappeared."
"I don't know what happened," Friedman said. "It's not a problem right now."
Last month, new rules from the U.S. Securities and Exchange Commission went into effect dealing with naked short selling. The rules require various stock markets to publish daily a list of companies that have had a certain number of shares traded without those shares being delivered to the buyer.
SEC spokesman John Heine said it's too early in the process to tell if the new measures are having an effect.
www.nj.com/business/ledger/index.ssf?/base/business-9/110862087570240.xml
Auction house files complaint, seeking inquiry into 'naked
short selling'
Thursday, February 17, 2005
BY GREG SAITZ
Star-Ledger Staff
Tired of what they think is manipulation of the company's stock price, executives at Greg Manning Auctions said yesterday they filed a complaint with regulatory officials about what appears to be short- selling abuses.
The auction house, based in West Caldwell, said it has asked NASD Regulation to investigate whether the stock is being manipulated by certain investors through an illegal practice known as "naked short selling." The issue has affected hundreds of other companies.
Short selling of shares is an acceptable trading practice. An investor who thinks a company's stock is going to drop will borrow shares from a broker and sell them, with the requirement that they be bought back -- hopefully, for the short seller, at a lower price -- and returned. The short seller pockets the difference between the higher price he sold the shares for and the lower price he bought them for.
With so-called naked short selling, an investor never bothers to borrow the shares. Naked short selling is illegal on most stock markets, including in the United States.
Chief Executive Greg Manning said the company has watched the number of shares held in a short position grow steadily during the past year or so. In February 2004, about 288,000 shares had a short interest, but by last month the number had ballooned to 2.59 million -- 37 percent of the company's outstanding shares.
Manning said the company decided to act after releasing solid second-quarter results last week -- profit was up 88 percent and sales increased nearly 19 percent -- only to see shares close at $11, down $1.21 from the opening price on volume four times normal.
"We had record results and it has appeared to us there has been manipulation going on," Manning said. "The only conclusion we can come to is there is illegal shorting going on."
The day it released its earnings, the company received phone calls from several investors who wanted to short the stock, but were unable to find any available, Manning said. In addition, Nasdaq told the firm tens of thousands of shares of Greg Manning Auctions had been shorted that day, he said.
A spokesman for the NASD, the security industry's regulatory association, did not return a call for comment.
The company also said it is taking steps to be delisted from the Berlin Stock Exchange, where its stock has been listed without its consent and is being traded. Dozens of other public U.S. companies discovered they also had been listed on the Berlin exchange, which some have said is the latest venue for naked short selling.
Hillside-based Integrated BioPharma, a vitamin company, went through the same problems as Greg Manning Auctions last summer. Eric Friedman, Integrated's chief financial officer, said yesterday the stock is no longer being traded in Germany.
The business got its attorneys involved, and after about two months "it finally just kind of disappeared."
"I don't know what happened," Friedman said. "It's not a problem right now."
Last month, new rules from the U.S. Securities and Exchange Commission went into effect dealing with naked short selling. The rules require various stock markets to publish daily a list of companies that have had a certain number of shares traded without those shares being delivered to the buyer.
SEC spokesman John Heine said it's too early in the process to tell if the new measures are having an effect.
www.nj.com/business/ledger/index.ssf?/base/business-9/110862087570240.xml