Short selling offers hope to Eurotunnel
Sunday 19 June 1994
On Friday the shares closed at a new low of 288p, only 23p above the underwriting price of 265p. This has raised fears that a large portion of the huge share issue, which closes on Wednesday, could be unclaimed.
Immediately before the issue was priced however, Eurotunnel, co-chaired by Sir Alastair Morton, accused City institutions of selling shares that they did not have, partly in order to drive the price down. This would almost certainly have led the new shares to be offered more cheaply.
The selling has continued, driving the price down further. But those institutions that were also sub-underwriters to the issue were effectively covered against their bear positions. As the market price of Eurotunnel shares fell, the rights issue became less attractive, ensuring that the sub-underwriters would be left with more unwanted shares - which they can deliver to meet their selling obligations at a guaranteed profit.
And with some institutions rumoured to be very short of the shares they have promised to find for buyers, the net effect to Eurotunnel may be to save the rights issue. The French authorities are conducting an inquiry into the alleged short selling, following a complaint by the French Eurotunnel shareholders' association.
On the night of the pricing for the rights issue, Eurotunnel's broker, Warburg Securities, is believed to have told other advisers that it was well short of its target for finding sub-underwriters. Sources close to the issue say that Warburg found only pounds 150m of sub- underwriting for its pounds 400m part of the issue.
Swiss Bank Corporation took almost one-third of the underwriting of the entire issue and therefore could be exposed to a significant holding in Eurotunnel stock if the issue flops.
The irregularities attending the pounds 858m issue have raised calls for tighter regulation of these projects to avoid abuses by City professionals at the expense of outside investors.
- 1 Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
- 2 I might be an MP, but that doesn't stop me fighting sexism with my breasts
- 3 Martha Stewart accuses Snoop Dogg of 'smoking for four hours' during Justin Bieber Roast
- 4 Google April Fools': company unveils backwards search engine and huggable digital assistant
- 5 April Fools' Day 2015: The best hoax news stories from around the internet
Martha Stewart accuses Snoop Dogg of 'smoking for four hours' during Justin Bieber Roast
April Fools' Day 2015: The best hoax news stories from around the internet
April Fools' Day 2015 live: The best pranks and fake stories from around the world
University of Cambridge: Remains of 1,300 scholars are found under building
Turkey power cut: Prime Minister says nationwide blackout could be caused by terrorists
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
The West has it totally wrong on Lee Kuan Yew
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
iJobs Money & Business
£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...
£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...