EDITOR UPDATE – GUESS WHO WERE PUSHING VMWARE (VMW) AS A CONVICTION BUY INTO TODAY’S 17% PRE MARKET FALL..? You guessed it – the Squid!!
It seems that everybody’s favourite investment bank – Golden Sacks – lived upto it’s “cute” reputation again last week, selling just under $30m of six-month structured notes tied to the share price movement of Apple. Here’s the punch-line – the notes (from the buyers side) made money if the share price rose and when did they sell the notes? The day before the company announced earnings that sent its stock plunging 12 percent!! You couldn’t make it up. And still people trade with them…
The securities, issued on Jan. 22, yield 10 percent a year, plus any gains of the stock up to 11.25 percent, according to a prospectus filed with the U.S. Securities and Exchange Commission. If Apple’s share price drops, the notes — which were sold at a face value about the same as a share of the Cupertino, California-based company — decline at the same rate, providing no protection against losses.
Structured notes, which are bank debt packaged with derivatives, allow individual investors to take bets on everything from the price of gold to movements in stock volatility.
Tiffany Galvin, a spokeswoman for Goldman Sachs, declined to comment on the offering. What a surprise..
Notes tied to single stocks or indexes tend to limit the amount that investors can lose by including so-called barriers or principal protection. Goldmanalso sold $14 million of automatically callable three-year notes tied to the iPad maker on Jan. 4, the second-largest Apple note this month, that yield 9.2 percent a year and shield investor capital as long as the stock doesn’t fall more than 30 percent, according to a prospectus filed with the SEC.
Last year, investors bought a phenomenal $1.75 billion of structured notes tied to Apple, making it the second-most popular reference measure after the Standard & Poor’s 500 Index. Notes linked to Apple surpassed those tied to the London interbank offered rate for the first time since at least 2010, when Bloomberg began collecting comprehensive data on the securities.
Investors have bought $65.6 million of Apple-linked notes in January. On the day before the earnings report, HSBC Holdings Plc’s U.S. banking unit also sold $710,000 of notes tied to the company, and UBS AG issued $120,000 of securities. Small beer compared to Goldman’s activities.
I don’t know what Goldman has to do to make peple think twice about dealing with them – have Blankfein stick a gun in your face and ask for you money?!!