SEC Bans Shorting GM Stock
Displaying a knack for euphemisms, The Detroit News reports that the Securities and Exchange Commission have banned short sales of General Motors stock until October 2, “a move aimed at preventing the stock from being driven down amid rocky market conditions.” (As the DeTN puts it, “Investors who engage in short sales attempt to profit from falling stock prices. They sell borrowed shares, hoping the price will drop so they can repurchase the stock later at a cheaper price and pocket the difference.”) GM joins a second wave of around 90 companies added to the list of 799 companies whose stocks can no longer be purchased in the hope/plan/acknowledgement that their share price is headed for the crapper. So why is GM on this list? “The SEC said the temporary move was needed to ‘prevent short selling from being used to drive down the share prices of issuers even where there is no fundamental basis for a price decline other than general market conditions.'” Again, so why is GM on this list? [As of 1:55pm, GM’s stock price was at $12.40, having dipped below $10 several times this year.]
It's a shame. As GM's stock price stands, there is no real reason to explain the upsurge in GM stock over the past week. Until GM can get in the red, GM stock deserves to be below $10. On top of the inflated stock price, if the Feds decide not to bail out GM the stock would plumit and shorts would have made a killing in the aftermath. A true lost opportunity... shorting GM right now would have been like shooting fish in a barrel.
The companies on the short sell ban list are companies with significant mortgage backed assests or significant exposure to them. GM qualifies as half owner of GMAC. I believe General Electric and some other manufacturers with credit arms made the list as well. I dont think it matters that much, GM's stock price should be stable or climbing with the bailout looming, or until such time as the bailout goes bust.
October 3rd could be an interesting day.
In other stock news, oil went up $15/bbl in one day. Hoo, followed closely by a ray. (rolls eyes)