It seems that nobody adressed 2 things that I think didn’t make sense. Please explain to me what I didn’t understand, or confirm that it didn’t make sense. 1) When Lebaouf’s first bank collapses and is in need of a bail-out, it is agreed that the mean bank will buy it for 3 / share. \>\>\> WTF ? They never mentionned new shares, but rather buying existing shares. How is that a bail out ? How does capital flow in a company when you buy existing shares ? Or was it implied that mean bank injects say 5 Bn of new capital @ 3 share ? 2) What is Lebouf’s job exactly ? We see him trading on the bank’s own account, as well as raising funds. >>> WTF ? Did they create some kind of Banking superman who trades AND does fundraising at the same time ? Txs for input.
Also. Shia’s margin call. The fact that one Ducati D16RR is in race plastics and one is in street mode. The fact that Gordon Gekko has a 5 million dollar flat. Among others…
Right, I also didn’t quite get that one: I don’t remember him levering up his position and I also don’t get how he could be liable for 500k. But I have read stories of people owing their brokers more than their initial margin deposit when the stock went to crap, so I’m not sure anymore. About my aforementioned point 1) : do you think it was implied that they were talking about new shares and we are the only ones that missed it, or do you think they just made a mistake in the plot ? I’m leaning towards the former, they can’t have screwed up something so obvious. About Gordon’s flat: he was renting he said, didn’t he ?
Viceroy Wrote: ------------------------------------------------------- > Right, I also didn’t quite get that one: I don’t > remember him levering up his position and I also > don’t get how he could be liable for 500k. > > But I have read stories of people owing their > brokers more than their initial margin deposit > when the stock went to crap, so I’m not sure > anymore. > > > About my aforementioned point 1) : do you think it > was implied that they were talking about new > shares and we are the only ones that missed it, or > do you think they just made a mistake in the plot > ? I’m leaning towards the former, they can’t have > screwed up something so obvious. > > About Gordon’s flat: he was renting he said, > didn’t he ? Of course you can own more then initial margin if there is a margin call
Comp ski kid I am not sure I understand your post.
lets say you bought 1k shares @50 with 20% initial margin… then you wake up next morning and the company filed for bankruptcy… you are short 40k… initial margin was 10k
I think the deal is supposed to mirror JPM’s takeover of Bear Stearns for $2 per share. The government backstopped the deal (i.e. limited JPM’s potential losses) which is where the bailout element comes in. In contrast when WFC took over Wachovia, it did so without government support. As for your second point. It’s hollywood! Don’t get too caught up in the finer details.
Txs for input. Please guys educate me : @ comp sci kid: In your example you would deposit 10 per share. If the share drops by 10 (-20%) your position is down to 0. Wouldn’t they at the latest close your position when the stock reaches 40 ? Unless in such a case they couldn’t unload your shares at 40 or at all so you are stuck with the losses? @ Carson: my point is that you would need fresh capital to allow a company to survive. If ownership changes from A to B, no money gets in the company, so I fail to see how that makes a company survive. Unless the deal was something like the following : A sells to B @ 2$ per share. B commits to *inject* capital in the company (which is different than buying existing shares), with the government guaranteeing the company. Is it kind of something like that ?
@Viceroy, csk is correct but using ambiguous terms. He’s saying you put up $10k initial margin on a levered position that goes from $50k to $0. Your account is worth -$40k at that point, which you owe to your broker. Also, re: Carson’s point, the acquirer has larger balance sheet. End of story.