Appaloosa: Firm Did Not ‘Knowingly’ Manipulate Market

Mar 26 2010 | 4:12am ET

Appaloosa Management has denied that it knowingly violated a rule that bars participating in a secondary offering if a firm is selling a stock short.

The Securities and Exchange Commission is investigating the $13 billion Chatham, N.J.-based firm for trades it made in Wells Fargo shares as the bank was acquiring Wachovia Corp. in 2008. In a letter to investors yesterday, Appaloosa said two of its funds shorted more than one million Wells Fargo shares between Oct. 31 and Nov. 5 of that year before buying 125,000 shares in a secondary offering announced on Nov. 5.

The hedge fund said it only learned of the secondary offering after its public announcement—and after it had already shorted the bank’s shares.

“There is no assertion that Appaloosa knowingly acted to manipulate the market for Wells Fargo stock,” it wrote.

The SEC’s Rule 105 bars investors with a short interest in a stock five days before a stock offering from participating in that offering. It is designed to prevent market manipulation.

The firm is cooperating with the probe, Appaloosa lawyer Christopher Clark told Bloomberg News.

“The amount of the stock in question is immaterial on any measure of Appaloosa’s finances, whether it be its balance sheet, income statements or asset under management,” he said.

The SEC is also looking at a series of trades made by Dallas-based Carlson Capital’s Black Diamond hedge funds around four secondary offerings.


In Depth

bfinance: Fees Falling Across Asset Classes, Yet Overall Investor Costs Still Climbing

May 16 2017 | 9:53pm ET

Despite unprecedented attention on fees, new research from investment consultancy...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Risk-Based Compliance: Why Oversight Of Outsourcing Is Critical

May 10 2017 | 7:02pm ET

Compliance is notoriously one of the trickiest middle office functions for funds...

 

From the current issue of