Sharks Circling the Galleon Galleon

One of my favorite bits of bloodthirsty Wall Street behavior is the feeding frenzy when a hedge fund goes down. The first thing everyone does is check the fund's known positions, figure out where the fund is in deepest -- the biggest positions in the least liquid stocks -- and then shorts the crap out of those stocks, expecting that said flailing hedge fund will have to sell.

With the preceding macabre thought in mind, here is a (for amusement only) table I put together over the weekend of Galleon's largest positions as measured by days to trade out of positions (as of 6/20/2009). I have updated the table to include in the final column the performance of these ten stocks on Monday of this week. As you can see, the top three stocks by days-to-trade all had a crummy day yesterday.

[Update]

I updated the table to take out AMD, which as a convertible position is more difficult to interpret. Again, a reminder, that this data is as of 6/30/2009, so Galleon may have traded out of all of these positions long ago. It's just interesting that its two most awkward positions had bad days yesterday after the revelations.

Comments

[TradingHelp...:]

Thanks for the tips but I do not wish to profit from the suffering of others. Not my kind of capitalism.

Oct 20 06:59 AM

[Living4Divi...:]

" One of my favorite bits of bloodthirsty Wall Street behavior is the feeding frenzy when a hedge fund goes down."

Using momementum shorting against CDSes and stock, hedge funds were the ones who brought down Lehman, and many big financial players. Hedge funds are the sharks of the financial world.

In the ocean, during a feeding frenzy, oftentimes the other sharks will turn on an injured shark and commence to devour one of their brethren.

Hedge funds are the sharks of the financial world. They devour weak and/or vulnerable companies. Why the pity or shock when one of the sharks devours another shark?

Oct 20 07:12 AM

[tripleblack:]

I don't think anyone pities Galleon or Raj, but the companies Galleon was invested in that are getting shorted for not other reason...

Yes, I agree, its not my type of capitalism, either.

BUT it is the underlying truth behind options, and how they work, and such occasions are one of the few events where the "formula" is most naked and easily seen. Note that the concept will probably work for smaller firms where the hedge fund had large holdings where the effect is magnified.

Oct 20 08:16 AM

[john s. gordon:]

amazing the flotsam & jetsam that lies exposed om the beach after the tide (bubble) goes out.
> jack

Oct 20 08:59 AM

[The Geoffster:]

Obviously, you are neither a doctor nor a lawyer.


On Oct 20 06:59 AM TradingHelpDesk wrote:

> Thanks for the tips but I do not wish to profit from the suffering
> of others. Not my kind of capitalism.

Oct 20 09:10 AM

[Gnart:]

Would someone please explain the "days to trade"? How is that number of days arrived at?

Thanks

Oct 20 09:32 AM

[bassmaster17:]

I assume the hedge funds are focused on Brazil today, don't know enough about the imposed tax to make a judgement. They see a chance to cause panic and they take it. It's nice to see them go down when they do. Brazil is on fire a pullback is probably overdue.

Oct 20 11:35 AM

[overbet:]

days to trade is usually the number of days it would take to cover the position based on the stocks average daily volume


On Oct 20 09:32 AM Gnart wrote:

> Would someone please explain the "days to trade"? How is that number
> of days arrived at?
>
> Thanks

Oct 20 11:50 AM

[Socialism c...:]

Hmmm...you're missing the boat: If they are being shorted for no other reason, you should be thinking this is a big long opportunity. Otherwise, if there is a reason...if they have been artificially pumped up, for example...then there is a legitimate short opp.


On Oct 20 08:16 AM tripleblack wrote:

> I don't think anyone pities Galleon or Raj, but the companies Galleon
> was invested in that are getting shorted for not other reason...
>

Oct 20 01:28 PM

[amdman:]

90% of the fund dollars listed are in AMD, a stock that was at $2 four months ago, and is now at $6.
That means Galleon has tripled its worth in just four months, how in the hell could a firm doing that fantastically good, have sharks trying to force a liquidation.
Disinformation, this whole article was probably cooked up by someone short AMD, that needs to cover, before AMD hits $10 on market share gains of AMDs ATI division.
Apple just announced its new iMacs line, largely powered by ATI, before it was all NVidea.

Oct 20 01:43 PM

[Hephasteus:]

On Oct 20 01:43 PM amdman wrote:

> 90% of the fund dollars listed are in AMD, a stock that was at $2
> four months ago, and is now at $6.
> That means Galleon has tripled its worth in just four months, how
> in the hell could a firm doing that fantastically good, have sharks
> trying to force a liquidation.
> Disinformation, this whole article was probably cooked up by someone
> short AMD, that needs to cover, before AMD hits $10 on market share
> gains of AMDs ATI division.
> Apple just announced its new iMacs line, largely powered by ATI,
> before it was all NVidea.

Because he's a hedge fund. Hedge funds are a purely destructive force. Getting caught will likely save alot of other AMD investors alot of grief as they would have plummeted it likely into insolvency when the busted the ponzi scheme. Whatever loans outstanding the bank views it's shareholders as unsecured creditors as they can wipe them without remorse on bankruptcy. When the stock goes low it would have made AMD's transition period of aquiring and position ATI into the market place problematic at best. Them getting caught probably just saved AMD a certain death.

Oct 20 03:44 PM

[amdman:]

Galleon is guilty of insider trading, not losing money. The company will pay a fine and some execs will go to jail. There is no threat of any liquidation, and even if there was it would take years to go through the courts.
The alleged source of this rumor paul.kedrosk.com has removed the reference to AMD.
As I said this is just disinformation to scare AMD investors so some shorts can unwind their positions before AMD goes to $10.

Oct 20 04:48 PM

[FierceAmbition:]

Unless there are two AERG's out there, the one in Tucson, AZ is a dinky little high-tech company that has gone from good to bad to terrible. Why does a hedge fund have a position in this stock? Something doesn't look right. Maybe you could find out. Those of us who got our asses kicked in this stock might be able to recover something from Galleon if there's anything "funny" going on.


On Oct 20 06:59 AM TradingHelpDesk wrote:

> Thanks for the tips but I do not wish to profit from the suffering
> of others. Not my kind of capitalism.

Oct 20 05:14 PM

[Graham and ...:]

You take the position (in number of shares) of a stock held by a large investor such as a hedge fund. It might be 500,000.

You compare that to the number divided by the average daily volume of the same stock. Call it 100,000 shares.

Then you estimate the portion of the average daily volume (ADV) your hedge fund is likely to be able to trade. Some people use as a rule of thumb, 1/4 of the ADV, or 25,000 shares.

Divide this into the position, 500,000 shares, if selling, or the desired position, if buying. At the rate of 25,000 shares a day, it would take 20 (business) days to trade 500,000.

Unless you have a very good broker who can find you a 500,000 share block on the other side, from say, Fidelity, or maybe two blocks of 200,000 and 300,000. Then it could be done in minutes.

On Oct 20 09:32 AM Gnart wrote:

> Would someone please explain the "days to trade"? How is that number
> of days arrived at?
>
> Thanks

Oct 20 05:55 PM

[junk scoote...:]

has anyone verified the number of shares that he claims was owned by Galleon on that date? I have.... and it's 11,100, go to the nasdaq site and look under "detailed institutional ownership". the stock was valued at $65,000. Maybe a typo?

Oct 20 08:21 PM

[junk scoote...:]

has anyone verified the number of shares that he claims was owned by Galleon on that date? I have.... and it's 11,100, go to the nasdaq site and look under "detailed institutional ownership". the stock was valued at $65,000. Maybe a typo?

Oct 20 08:21 PM

[junk scoote...:]

11,000 shares is all Galleon owned in AMD not 65 million. Go to page 12 and see for yourself. It is a new position so they could not have sold either.

www.nasdaq.com/asp/hol...

Oct 20 08:28 PM

[Moon Kil Woong:]

LOL knowing Galleon for what it is, it is probably shorting its own positions as it pares it's positions. Talk about great inside information lol. Now they just need a bit more bad news to really clean up.

Oct 20 10:04 PM

[Nettligent:]

Galleon is a crook. Shareholders will pay the price. Time to dump these holding companies.

Oct 21 03:35 AM

[Living4Divi...:]

Good one !


On Oct 20 10:04 PM Moon Kil Woong wrote:

> LOL knowing Galleon for what it is, it is probably shorting its own
> positions as it pares it's positions. Talk about great inside information
> lol. Now they just need a bit more bad news to really clean up.

Oct 21 09:37 AM

[TradingHelp...:]

No quite sure how my personal investment philosophy of not wanting to profit from the suffering of others deserves so many thumbs down?

I see 'greed is good' still lives.

Oct 21 10:36 AM

[Nettligent:]

The problem is worsen and Galleon has no choice but to shut down hedge funds. Funds are liquid and stock holdings can be converted to cash for distribution to fund shareholders.

Galleon Group manages about $7 billion and most of its ill gotten gains were illegal.

Oct 22 12:48 AM

[Peter Mycro...:]

Here is a complete list of Galleon's holdings as of June 30, 2009

www.sec.gov/Archives/e...

This is their 13F-HR filing with the SEC from 8/14/09

Oct 22 02:17 AM

[amdman:]

Looks like I blew it about Galleon not liquidating, and that likely explains why AMD is down.
I dont day trade, so this little move down is just noise to me.

Oct 27 08:52 PM