HOW IT ALL TRAN­SPIRED

Finweek English Edition - - Companies & Markets -

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.

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