It was just an example. However I see no mention o
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Posted On: 03/21/2019 12:57:56 PM
It was just an example. However I see no mention of bankruptcy for these and he still can’t close out his short positions after several years ( 6 years for one it looks like).
At the start of this decade, Gates’ funds shorted some of the U.S.-listed Chinese companies that later turned out to be frauds. The stocks crashed, but even so, the short sellers lost money. That’s because they couldn’t close out their positions in the halted stocks, and therefore had to continue posting margin security and pay to borrow the shares—for months, sometimes for years. As we reported at the time (“Even Short-Sellers Burned by Chinese Shares,” June 18, 2011), these investors who had uncovered many of the frauds and made the correct bet, ended up owing millions to their own prime brokers’ stock-loan departments. For whatever reason, the brokers seemed in no hurry to fix the problem.
Gates says he is stuck short China-Biotics, for instance, a stock that was halted in November 2013 when the Securities and Exchange Commission revoked its registration. The shares were delisted, and the company shut down. Gates showed us a January 2018 letter that he says he sent to the stock market record keepers at The Depository Trust Co., in which he laments that a TFS mutual fund has paid hundreds of thousands of dollars in stock-loan fees on China-Biotics and remained subject to the $2.50 a share margin required by Financial Industry Regulatory Authority rules. A handful of other short positions have him in the same predicament.
At the start of this decade, Gates’ funds shorted some of the U.S.-listed Chinese companies that later turned out to be frauds. The stocks crashed, but even so, the short sellers lost money. That’s because they couldn’t close out their positions in the halted stocks, and therefore had to continue posting margin security and pay to borrow the shares—for months, sometimes for years. As we reported at the time (“Even Short-Sellers Burned by Chinese Shares,” June 18, 2011), these investors who had uncovered many of the frauds and made the correct bet, ended up owing millions to their own prime brokers’ stock-loan departments. For whatever reason, the brokers seemed in no hurry to fix the problem.
Gates says he is stuck short China-Biotics, for instance, a stock that was halted in November 2013 when the Securities and Exchange Commission revoked its registration. The shares were delisted, and the company shut down. Gates showed us a January 2018 letter that he says he sent to the stock market record keepers at The Depository Trust Co., in which he laments that a TFS mutual fund has paid hundreds of thousands of dollars in stock-loan fees on China-Biotics and remained subject to the $2.50 a share margin required by Financial Industry Regulatory Authority rules. A handful of other short positions have him in the same predicament.
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