Rule 144a is not a way to make money, as a rival service is suggesting. It is the SEC regulation that limits trading in some unregistered securities to officially qualified institutional buyers. QIBs must trade $500,000 each time and have at least $100 mn in investable assets. Only QIBs can trade 144A securities and if you are not a QIB they hang your broker on a high tree for letting you buy.
These 144A securities are often used by foreign companies to access the US capital markets for money without having to go through the expensive process of meeting SEC registration and reporting rules. Here is the cute bit. After 90 trading days, 144A restrictions disappear and so anyone can buy what is now considered to be a ‘seasoned’ issue. But 144A stocks do not just go up until the retail mob can buy. They vary.
So the rule is not how to pick stocks. it is how you cannot buy until later. Many Global Depositary Investment Receipts, GDRs, are also issued as 144A stock. Again after 90 days we can buy if we want. but do not assume just old any 144A stock is a good buy, a fast-growing company, or any of what the promotion writers say. Not true.
There is a different reg called 144 which I will not bother you with.
I happen to think the SEC rules are pain in the klister mainly because sometimes ADR stocks spin off some of their businesses into a new company and do not register it. the result is that the ADR holder gets unregistered securities which either are sold by the depositary bank (after a haircut) or kept in some obscure hole in your account denominated in a foreign currency. If you sell the broker
gets to whallop you with a fee for the foreign exchange. So I agree with this writer that the little guy (or gal) is hurt by the overzealous nanny SEC.
The SEC did not catch Madoff but they help the system nickel and dime retail investors with the registration rules which are expensive for foreign companies to comply with: lawyers, advisors, underwriters, auditors, etc.
The SEC restricts and interferes with legitimate non-cash distributions in cahoots with brokers and depositary banks under guise of protecting Joe Sixpack, the small shareholder.
I have been writing this for years. Mary Schapiro does not listed. Her predecessors like Arthur Levitt whom I have met didn’t either.
Because I will be at a Financial Times investment conference most of Thursday, I am filing this blog on Weds. Night. No I am not sorry that I spoke against gold yesterday. I am still heavily into the precious metal, but I think that it should not overweight one’s portfolio in the present climate of ecnomic stagnation or contraction.
Apart from FT writers Martin Wolf, whom I have met, and Gillian Tett who wrote one of the best-reviewed books about the 2008 crash, I will rub shulders with Robert Rubin, ex-Treasury Secy, Mo El-Arian of Pimco, and Nobelist Joe Stiglitz, now a Columbia prof, and Geroge Soros, both of whom I have met. And Larry Summers, former president of my Alma Mater.
Ever since she saw the Darth Vader black tower housings its HQ in Brazil, your editor has been wary of Petroleos Brasileiros, or Petrobras, which after the state upped its share of the once privatized firm to 48%, took another dive yesterday. PBR was cut to “equalweight” from “overweight” by Barclays Capital which warned that there may be further equity sales to help finance the under-salt offshore fields PRB wants to control. Petrobras sold a record $70 bn on Brazilian markets last month. The BCS anaalyst is concerned “that he next administration will further increase the use of Petrobras as the tool for the country’s bigger economic and social development. ” So Paul Chang of Barclays warns that there will be more trips to the market that could “lead to lower future return for Petrobras’s minority shareholders over the next several years.” PBR is off by 26% YTD despite higher oil prices.
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