HOW IT ALL TRANSPIRED
2 January 2008. Purchase of 10 000 SSFs, 1 000 000 shares at R19,72/share. Net long position 1 000 000 shares. 22 January 2008. Sale of 2 000 000 ordinary shares at R17,50, and purchase of 40 000 SSFs (4 000 000 shares) at R17,53. The net cash income from this transaction after the deduction of the initial margin as well as the initial margin and follow-up (variable) margin for the first transaction was around R20m. Melnick’s exposure to Peregrine after the two transactions increased by 3 000 000 shares. 12 February 2008. Purchase of 10 000 SSFs (1 000 000 shares) at R15,44/share. 1 April 2008. Purchase of 25 000 SSFs at R14,79 and, at the same time sale of 2 500 000 ordinary shares at the same price. That pushed his cash up by nearly R37m. His effective exposure to Peregrine remained the same, because he bought (SSFs) and sold (shares) at the same time. 6 June 2008. Sale of 2 000 000 ordinary shares in Peregrine at R11,85 each for a cash income of R23,7m, and purchase of 20 000 SSFs (2 000 000 shares) at the same price. The cash flow came in handy. At this stage, the ongoing fall in the share price was eating an increasing hole in his cash from the sale of the shares. The regular daily calls for more margin to cover the unrealised losses on his now substantial portfolio of 105 000 SSFs (or 105 000 000 shares) could be bothersome. 3 March 2009. Somebody’s knees gave way. It could be the bank that guaranteed the settlement with Safex, or it could just be the generally poor climate after Cortex, a dealer in Safex products, also folded following the problems with Dealstream, which were still fresh in the memory. Melnick closed his position, sold 105 000 SSFs on Peregrine and, at the same time, bought 10 500 000 shares back, both transactions at a price of R4,70/share. The loss on the SSFs was substantial; somewhere around R100m. The fact that Melnick sometimes also sold ordinary shares simultaneously at the high prices at which Peregrine sometimes traded eased his pain somewhat. But no matter how you do the calculations, the outing must have cost Melnick somewhere in the region of R40m net. 20 March 2009. Melnick closed another position on Peregrine by selling 70 621 SSFs and buying back 7 062 075 shares. This time at a price of R5,20/share. The run-up to the transaction hasn’t been reported on Sens since January 2008 and probably originated somewhere in 2007. The loss on this must also be considerable – perhaps even more than on the 105 000 SSFs of 2008.