New York Attorney General Andrew Cuomo is broadening his investigation of short selling on Wall Street, a senior official in his office says.
Cuomo is turning to the massive credit-default swap market, which he believes may have been manipulated in order to give the impression that certain companies were in trouble.
The official said on Friday that Cuomo has subpoenaed information from providers of market data in what could be a huge probe into one of the factors contributing to volatility in the stock and credit markets. The official spoke on the condition of anonymity because the investigation hasn’t been announced.
Cuomo believes the swap contracts may have been abused by short-sellers who spread negative rumors as a way to drive down a company’s share price.
Credit default swaps protect an investor in the event a company defaults on their debt. Their price is a measure of a company’s soundness, so a higher price for the swap should be a signal of trouble with a company’s financial standing.
Cuomo suspects short sellers used credit default contracts to make a company’s position appear worse than it actually was. That could help short-sellers profit from a decline in a company’s shares.
In a short sale, an investor borrows shares of a company, usually from their broker, and then immediately sells them at their market price. If the share price subsequently falls, the investor buys back the shares at the lower price and pockets the difference.
The federal government blamed massive short selling by hedge funds for contributing to the collapses of Lehman Brothers Holdings Inc, American International Group Inc (AIG) and other troubled companies.
Big drops in share prices can be particularly damaging to financial companies by making them appear weak to lenders, clients and other participants in financial markets, as well as making it harder for them to raise capital when they need it. The Security and Exchange Commission’s temporary ban on short-selling gave a number of companies time to stabilize.
The subpoenas this week went to trading information companies Markit Group Ltd, Depository Trust & Clearing Corp and Bloomberg LP.
Markit vice president John Dooley declined comment on Friday.
Spokesmen for Depository Trust & Clearing Crop and Bloomberg didn’t immediately respond to requests for comment on Friday.
The senior official said Cuomo is looking at data on the transactions over the last several weeks involving American International Group Inc, Merrill Lynch & Co, Morgan Stanley, Goldman Sachs Group and Washington Mutual Inc.
Cuomo’s other Wall Street investigations include his probe this year into complaints about short sellers of stock and whether they engaged in a conspiracy or spread rumors and bad information to influence the stock prices of Lehman Brothers, AIG, Goldman Sachs and Morgan Stanley and other firms that have been hammered in the ongoing financial crisis.
TECH RACE: The Chinese firm showed off its new Mate XT hours after the latest iPhone launch, but its price tag and limited supply could be drawbacks China’s Huawei Technologies Co (華為) yesterday unveiled the world’s first tri-foldable phone, as it seeks to expand its lead in the world’s biggest smartphone market and steal the spotlight from Apple Inc hours after it debuted a new iPhone. The Chinese tech giant showed off its new Mate XT, which users can fold three ways like an accordion screen door, during a launch ceremony in Shenzhen. The Mate XT comes in red and black and has a 10.2-inch display screen. At 3.6mm thick, it is the world’s slimmest foldable smartphone, Huawei said. The company’s Web site showed that it has garnered more than
CROSS-STRAIT TENSIONS: The US company could switch orders from TSMC to alternative suppliers, but that would lower chip quality, CEO Jensen Huang said Nvidia Corp CEO Jensen Huang (黃仁勳), whose products have become the hottest commodity in the technology world, on Wednesday said that the scramble for a limited amount of supply has frustrated some customers and raised tensions. “The demand on it is so great, and everyone wants to be first and everyone wants to be most,” he told the audience at a Goldman Sachs Group Inc technology conference in San Francisco. “We probably have more emotional customers today. Deservedly so. It’s tense. We’re trying to do the best we can.” Huang’s company is experiencing strong demand for its latest generation of chips, called
Vanguard International Semiconductor Corp (世界先進) and Episil Technologies Inc (漢磊) yesterday announced plans to jointly build an 8-inch fab to produce silicon carbide (SiC) chips through an equity acquisition deal. SiC chips offer higher efficiency and lower energy loss than pure silicon chips, and they are able to operate at higher temperatures. They have become crucial to the development of electric vehicles, artificial intelligence data centers, green energy storage and industrial devices. Vanguard, a contract chipmaker focused on making power management chips and driver ICs for displays, is to acquire a 13 percent stake in Episil for NT$2.48 billion (US$77.1 million).
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the