Regulatory Announcement
Released: 10.30GMT 01-Dec-08
6511D13
New Star Asset Management / Financial Services Authority
Market Consultation Exercise; Intention to Publish Working Paper
In the matter of the non-suspension of share trading in New Star Asset Management (NSAM) on December 1, 2008, FT Alphaville (the blog), having assumed powers of financial oversight during September’s regulatory vacuum, on Monday called for expressions of interest and opinion in regard to whether regulators can be found to have caused a listed entity’s collapse through bull-headed obstinacy.
The Facts
Shortly after 7am on the Monday in question, a communication was issued by NSAM via the regulatory news service:
New Star announces that it is in advanced and constructive discussions with its bank syndicate. Pending the outcome of these discussions, New Star has requested a temporary suspension of its ordinary shares. A further announcement will be made as soon as possible.
Shortly before 8am on that Monday NSAM was informed that the request for a suspension had been denied and that trading in NSAM’s stock would proceed as usual.
Except that all investors – now alive to the fact that the fund management company wanted a trading halt — rushed for the exit. NSAM’s price collapsed, further imperilling the company’s survival.
FT Alphaville’s provisional findings
All market participants, including regulators, have a duty to avoid mutton-head actions that would otherwise bring the London equity market into disrepute. In this case either the regulator was incompetent for allowing NSAM to inform the market that it was seeking a suspension when it knew that no suspension was forthcoming or the company was suicidal in flagging the suspension when this was bound to create panic in the market.
The matter is all the more astonishing since NSAM’s principals – think John Duffield and former Warburg banker Howard Covington – are assumed to know how the stock market works.
Either way we’re taking Death Star here. A massively-dilutive debt-for-equity swap at, say, 2p is the firm’s only hope of survival.
Related links:
You will trade Mr Duffield! (updated) – FT Alphaville
12:42 17-Sep-08 FT Alphaville statement re possible offer for FSA