The one thing that confused me about all of this was that he was investing in CFDs. Therefore doesn't that mean he wasn't actually buying shares in Anglo? So how could he own 25% of the bank if he was investing in CFDs? Wasn't he betting on the share price of Anglo rather than actually purchasing shares in the bank?
But the bank wanted SQ to close his position and convert to a real share holding that's what they were trying to engineer.SQ's position was underwater, so for the bank, they recognized that there was a high chance that SQ would close his positions, with the broker consequently dumping the shares they were holding, causing a further significant drop in the Share price. This what the market also suspected so traders kept up the pressure on the stock
Because as the price dropped he was "margin called" meaning he had to front more cash to cover the delta between his CFD price & the actual falling share price.The one thing that confused me about all of this was that he was investing in CFDs. Therefore doesn't that mean he wasn't actually buying shares in Anglo? So how could he own 25% of the bank if he was investing in CFDs? Wasn't he betting on the share price of Anglo rather than actually purchasing shares in the bank?
How was one man, Sean Quinn, able to legally transfer all that money to buy the CFD's. Were others needed to sign off, can one man, owner or whatever, actually do this without anyone knowing it. Watched it and must say I feel very sorry for Sean Quinn and I know others will have a different opinion. That's fine too. Fitz and Drumm for me knew only too well what was going on.
Quinn was no fall guy , he made a massive unnecessary bet and it backfired spectacularly , he was too stubborn to liquidate it when he could have and take a manageable loss.But who were the financial officers in all of this? Company auditors, bank auditors, central bank, etc. Co accounts were signed off on, don't tell me the Goverment didn't know, or certain people in the Goverment. The whole thing stinks to high heaven and for me Quinn, while no innocent in all of this, is a fall guy. Some involved in this are dead, others are far away but far from broke, a few served jail time. But was justice done? Was it hell.
I get the concept of CFDs, but (and please excuse my ignorance here), if he didn’t hold actual shares, why was his position of such relevance to the sustainability of Anglo?He wasn't buying shares. Had he bought shares, the catastrophe might have been avoided. He was trading in derivatives, better known as junk bonds, which have no assets backing them. It is a gamble that an asset, currency, share, or other tangible will change in value at some future date, either up or down. The bettors never own the asset(s), they are simply gambling on the value of the asset in the future.
I have a limited understanding of the complexity. But the Quinn group was also a large customer of Anglo. As the CFDs bombed the Quinns had to find hundreds of millions to fund their margin calls - or they risked collapse. That collapse would have adversely affected Anglo who in turn advanced these hundreds of millions to the Quinns to cover their losses. They also feared that if the Quinns collapsed and the CFDs were exposed there would have been an immediate total collapse in Anglo's share price and a run on the bank which they couldn't meet. They entered a death spiral together, with either one going down bringing the other with it.I get the concept of CFDs, but (and please excuse my ignorance here), if he didn’t hold actual shares, why was his position of such relevance to the sustainability of Anglo?
Thanks for that. So it was really the extent of the CFD exposure at the worst possible time that lit the fuse.I have a limited understanding of the complexity. But the Quinn group was also a large customer of Anglo. As the CFDs bombed the Quinns had to find hundreds of millions to fund their margin calls - or they risked collapse. That collapse would have adversely affected Anglo who in turn advanced these hundreds of millions to the Quinns to cover their losses. They also feared that if the Quinns collapsed and the CFDs were exposed there would have been an immediate total collapse in Anglo's share price and a run on the bank which they couldn't meet. They entered a death spiral together, with either one going down bringing the other with it.
Thanks for that and @Early Riser gave a good backround aswell, however from what you have said above well If the broker has to buy the stock because of the CFD betting on the share price rising well surely then Sean Quinns CFD position would be actually supportive of the share price because he is buying the other side of all those contracts that are betting on the share price falling. If anything then Sean Quinn's CFD position although disastrous for himself personally was actually supporting the Anglo share price ?Yes they are derivatives but someone (the broker) has to take the other side of the trade so CFDs on any instrument will be backed wholly or in part by a position in the underlying. So you cannot magic a large stake in a listed company via CFDs without buying the shares in the first place.
Absolutely. That was the problem. Sean's immense "long" position in the share was essential to supporting its price. But CFDs are geared positions, meaning that as the share price falls the owner has to stomp up money to pay the debt backing the CFD. The doomsday scenario would be that Q would need to liquidate his CFD which would be a monster selling force on a share price already in freefall. It is called procyclicality.If anything then Sean Quinn's CFD position although disastrous for himself personally was actually supporting the Anglo share price ?
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