New way to lose money discovered

Activist aims to sink Coke shares

Fri Nov 26, 5:55 AM ET

By Tim Castle

LONDON (Reuters) - A former Wall Street stockbroker plans to launch a hedge fund to short-sell shares in Coca-Cola and give any profits to people in countries he says the U.S. drinks company has exploited.


Max Keiser, 44, a self-styled "investment activist", has teamed up with the son of the late entrepreneur Sir James Goldsmith with the aim of halving Coke's share price to $22 in 12 months from its current value of around $40.


Profits from the fund would be distributed to the "victims of Coke" in a process supported and audited by Zak Goldsmith's London-based Ecologist magazine, which will decide where to donate any proceeds.


Keiser says Coca-Cola has poisoned land in India and trampled on human rights in Colombia, charges the company has frequently and vigorously denied.


"Coke's been down this year as sales dry up," Keiser told Reuters, attributing part of the fall in the stock to anti-American sentiment following the U.S.-led invasion of Iraq (news - web sites).


Earlier this month, Atlanta-based Coca-Cola, the world's largest soft drinks company, lowered its long-term earnings and sales targets, saying it expected demand for its products to remain weak in North America, Germany and other key markets.


Keiser hopes a campaign to boycott Coca-Cola products will undermine the company's share price, making money for his as yet unnamed hedge fund, which will sell Coke shares with the aim of buying them back more cheaply later.


"Our target for Coke is $22 as dissent is pushed back onto the balance sheet," said Keiser, a New Yorker living in London who runs investment activism website KarmabanQue.com.


Coca-Cola stock touched a year low of $38.30 in October, well down from highs of over $85 they reached in the late 1990s. They closed at $39.80 on Wednesday, before the Thanksgiving holiday, valuing the company at more than $96 billion.


"BLATANT FALSEHOODS"


"This so-called campaign is based on blatant falsehoods," Coca-Cola spokesman Ben Deutsch told Reuters by phone from Atlanta.


"It's unfortunate that anyone would attempt to hurt Coca-Cola shareholders by waging such an effort without knowing and recognising the facts," Deutsch added.


Keiser worked with Wall Street stockbrokers PaineWebber and Alex Brown in the 1980s before co-founding the Hollywood Stock Exchange website, a virtual exchange trading celebrity values which is now owned by broker Cantor Fitzgerald.


He plans to register his hedge fund by early next year, probably in Britain, and to tap a number of rich private investors to raise up to $100 million.


Iain Martin, editor of specialist London monthly Hedge Fund Manager, said Keiser's investment strategy had several merits and that his funding target was attainable.


"Hedge funds are attracting a lot of interest from high net worth individuals and institutions," Martin said. "I think there's no reason to think he won't achieve that total."

http://news.yahoo.com/news?tmpl=story&u=/nm/20041126/od_uk_nm/oukoe_financial_hedge_coke_2

I can think of at least one person who might actually throw money at this........

Gore starts socially conscious fund

Former VP, ex-Goldman official bet big money is ready for 'sustainable growth' investing.
November 9, 2004: 10:19 AM EST

LONDON (Reuters) - Former U.S. Vice President Al Gore and an ex-CEO at Goldman Sachs Asset Management have launched an investment firm to seek out companies taking a responsible stance on big global issues like climate change.

http://money.cnn.com/2004/11/09/news/newsmakers/gore_fund.reut/

I don't have the patience to read all that. What bad things did Coke supposedly do? I like Coke, plus it's a generally well-run company. I can't see it going to 22 bucks, but shit like this is never good news for any company. I wonder what the load on that fund is.

One would hope an ex-Goldman CEO and the former VP would be brighter than to buy into this. I doubt they will be interested in becoming involved, because the goal is unrealistic and there's little money to be made unless the stock market tanks hard in the future or something goes awfully wrong in Coke's business plan .

I, too, wonder what the load is on that guy's fund.

You know a lot more about this stuff than I do. Would using a fund to intentionally lower the price of a company's stock be considered market manipulation?

No, they openly state they're gonna short the stock. It's no different than like when Jesse Jackson or some Christian group leads a boycott of a company over some social issue. The key issue in most of these cases is full disclosure. We have a free market system, so as long as you're open about what you're doing and don't trade on inside information, you can pretty much do what you want. I don't see anybody making any money off this kinda fund, though...except the people running it. That's why I'm curious about the load.


[Edited on Nov 29, 2004 by souljacker]

The could be so badly hurt in a short squeeze. Going short is not like a long position, if the loaned shares are called in they have to buy back, possibly at a huge loss. With long positions, the buyer owns the shares and they thus have complete control over the position.

Anyway, where is the hedge in a naked short position?

My first reaction is: fucking brilliant! The only way to get a company's attention these days is by hitting them in their pocketbook.

My second reaction after thinking about it for a few seconds is: Wait, I don't understand business principles or the financial markets and I don't really want to.

As soon as I can solve the problem of getting my SG in a cave on an uncharted desert isle, I'm so there...

In India I know that chemical runoff from production in Coke factories have been found in the ground water. And that's never a good thing.

I would imagine they would try to create some kinda hedge with other positions that they feel are highly reverse-correlated. Certainly would be rather risky. One can only assume that if the stock started to go the wrong direction they would start taking long positions in Coke.

Short selling, like commodities trading, strips and derivatives, is a great way to lose a ton of money fast if you don't know exactly what you're doing.

Actually, most modern derivatives are not risky. They actually are generally created to offset other risks inherrent in a given portfolio.

dosn't coke have a huge stake in Mc Donalds
who have a huge stake in starbucks

I can thank Trading Places for my understanding a tenth of this discussion

Yeah, I like that movie.

Is there really any way that anyone could touch Coca-Cola? Aren't they so far ahead of the rest of the market that this is pretty much an exercise in futility?

I dunno, I've seen some otherwise intelligent, experienced traders lose their ass in mortgage-backed securities, including those who specialise in them and run (ran) hedge funds.

Derivatives in the mortgage industry should only be used as hedges or as hedge-like instruments to offset interest rate risk. What you refer to is not a problem with the derivative instrument, but rather with the speculative use of the instrument. There is far greater risk to a mortgage portfolio if there is no hedging done using derivatives to mitigate the risk of rising or falling rates, regardless of whether the balance sheet is asset or liability sensitive.

True enough. The one guy was greedy, and fell for that reason. He was hardly alone, though, and the prevailing greed of some fund managers led to the management abuse of those funds.

so, when it gets to 22, buy?

Don't hold your breath.

I don't know what Coke did, but this is interesting to me. I am curious to how his is going to pan out. I'd rather see a company like Halliburton get fucked like this though. I am not a big fan of soda, but here are a few times a year I like to drink a can(not bottle, unless its oldschool glass) of coke.

BBC news story

They were giving chemical sludge to local farmers saying it was a fertilizer. It wasn't; it waste waste that coca-cola should have been paying to get rid of properly.

Its tough to outmanipulate those who have more money than you. Moreso when you tell them what you're up to. If the fundamentals suggest KO is worth 40, many would love the chance to buy this activist's shorts at 22. Get a good company at half price, and the activist has to pay your dividends out of his pocket. Nice.