I really wonder where this ends and where the SEC is? Now it looks like the pack animals (locusts) will attack Morgan Stanley (MS) no matter if they have solid earnings - and the same tricks can now be used on any sector. Buy up credit swaps, create a "fear", short the stock, spread a rumor about something is amiss, longs get worried, sell into the fear, and you have the cascading effect down. It is now plain in sight but no one cares. They did it to Constellation Energy (CEG) the past 48 hours, now the companies have to issue press releases denying rumors but the shareholders, 401k participants at these companies and the like are suffering major damage. An unbelievable environment.
- Constellation Energy (NYSE: CEG - News) today announced that the sponsoring banks have confirmed that the firm, underwritten commitment for an additional $2 billion credit facility announced on Aug. 27, 2008, remains in effect. (the rumor was spread that this $2 billion would be pulled)
- Constellation Energy also confirmed that it has retained Morgan Stanley and UBS to act in an advisory capacity to evaluate strategic alternatives. The company and its advisors are in active discussions with potential strategic partners. (which means worst case scenario you are forcing us to sell ourselves even there is no reason for us to do so, other than rumors and hedgies buying the credit swaps in bulk to create an assumption "something is very wrong" - while spreading rumors to back it up)
- Constellation Energy also reinforced that its credit exposure to financial institutions is limited. As of Sept. 15, 2008, Constellation Energy had net credit exposure to 14 financial institutions. The company's estimated aggregate credit exposure, net of collateral, to these financial institutions was approximately $120 million, with no single financial institution representing more than $28 million of net credit risk exposure.
- Constellation Energy reaffirmed its third quarter 2008 outlook of $0.83 to $0.99 per share and full-year 2008 earnings guidance of $5.25 to $5.75 per share.
So on the positive side it is good management is proactive and addressing the "rumors" making the rounds. On the other side, the damage has been done to the stock, a lot of rumor mongers made a lot of money, and the fact this is an acceptable environment is an indictment of the current US financial system. It's a casino and circus into one. The regulators remain asleep.
Long Constellation Energy in fund and personal account
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