Shorting Shares – An Example of Motives

This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

One of the most peculiar stories in the last week was the revelation that the attack on the Borussia Dortmund football team’s bus was not a terrorist attack after all. According to German police it was done by an individual investor who hoped to profit by shorting the shares. By killing or injuring their star players, he expected their publicly quoted share price to fall sharply.

Indeed the share price did fall by 3% but as the injuries suffered were relatively minor to one player, it did not fall further. But it was only luck that meant the injuries were not worse and there could well have been fatalities.

The perpetrator (named as Sergej W. by the police) bought 15,000 put options a couple of days before the event at a cost of 79,000 Euros while sitting in a hotel room overlooking the scene of the attack. Both that and suspiciously worded notes left at the scene led to his arrest.

Let us hope that this scenario is not repeated by others. But being able to sell short provides a lot of opportunities, not just for creating “fake news” which is of widespread concern at present, but as in this case of actually creating negative news. It’s a lot easier to create negative news than positive news. Was the BP Macondo oil well disaster (total cost over $60 billion) an accident or driven by someone shorting the stock? Conspiracy theorists need look no further for a good story.

Perhaps investors will need to look carefully at negative news in future.

Roger Lawson

Postscript 29/4/2017: Some readers of this blog post interpreted the last but one paragraph as a humorous reference which might be considered inappropriate bearing in mind the deaths in the BP Macondo disaster. Considering that there were potential deaths in the Borussia Dortmund attack, the post was intended to highlight the very serious aspects of the affair. It was of course not intended to be humorous in any way but was encouraging readers to think about the other potential consequences of similar attacks (and oil wells are very vulnerable to terrorist attacks as is well known). The reference to conspiracy theorists was just meant to indicate that I did not consider it likely that Deepwater Horizon was a malicious act. But that does not mean there won’t be such attacks in the future. In the brief literary form that is a blog, one cannot explain everything in detail but it was meant to encourage readers to consider all the aspects of this matter.      Roger Lawson

One comment
  1. Mark Northway says:

    Wel it certainly missed the mark by a country mile….

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