Bailout

Margin Call Monitor: Buy Signals

By Admin

Insider buying has historically been one of the best buy signals. Well, the dark side of exuberant executive enthusiasm is forced insider selling when shares bought on margin plummet. That’s when insider selling could become a buy signal as share prices artificially beaten down by one or several large block trades offer an opportunity for a rapid snapback.

Today’s XL Capital (XL: 11.54 +55.32%) Chart is a case in point after it was disclosed that Chairman and former CEO Brian O’Hara was forced to sell 80% of his stake in the reinsurer.

Other margin call selling that has recently been disclosed:

• Aubrey K. McClendon, founder, chairman and chief executive of natural gas producer Chesapeake Energy (CHK: 21.58 +6.83%) had to sell 31.5 Million shares,94 percent of his 5.8 percent stake, for $569 Million after purchasing them July 2 on margin for $2.2 Billion.
• John Malone seems to have gotten a margin call, selling 4.5 Million shares of Liberty Media’s Capital A (LINTA: 7.48 -4.59%) tracking stock for $11 a share which were presumably part of the 6.6 Million shares he purchased in July for $14 each.
• Summer Redsone’s National Amusement, which controls CBS (CBS: 9.53 +9.04%) and Viacom (VIA: 20.30 -3.61%), sold $233 million worth of non-voting shares in the two media conglomerates: 7 million Class B shares of Viacom and 17 million Class B shares of CBS
• Life Time Fitness (LTM: 20.17 +0.45%) CEO Bahram Akradi sold 582,000 shares of Life Time stock, 13% of his holdings, worth roughly $11 Million.
• Ukrainian billionaire Konstantin Zhevago sold a 20.8% stake in metals and mining group Ferrexpo [[FXPO.L]] to RPG Industries, a holding company which controls London-listed mining company New World Resources, raising $180m and retaining a 51% stake, after they lost 74% of their value from their high and are trading 22% below the IPO price.
• Russia?s richest man Oleg Deripaska, through his holding company Basic Element, handed a 20% stake in Canadian auto parts company Magna (MGA: 38.48 -3.80%) to BNP Paribas after borrowing $1.2bn to buy the $1.54bn stake.
• Other margin calls hit Tesoro (TEN: 5.53 +3.36%), Homex (HXM: 25.00 -4.10%), Connacher Oil & Gas [[CLLZF.PK]], and Nexus (NXUS: 6.74 0.00%).

Full post as published by Bailout Report on October 14, 2008 (boomark / email).