Monday, December 21, 2015

Green Nasties at Abengoa: "How BlackRock Made a Killing From Spain’s Biggest Ever Corporate Meltdown"

"Sorry hippy, this ain't Woodstock, this is Altamont"
-that's me, trying to imitate a BlackRock honcho channeling Bowie's
"This ain't rock and roll, this is genocide" but with less reverb.

I know, it gets confusing.
Trust me, I know.

From Wolf Street: 

Hiring the former CEO and then shorting the shares.
In a somewhat surprising decision, Spain’s High Court said on Friday that it would investigate allegations against two former executives of renewable-energy giant Abengoa, which days earlier had filed for preliminary bankruptcy protection. Some of the creditors had filed claims against former Chairman Felipe Benjumea and former CEO Manuel Sanchez Ortega. In Sánchez Ortega’s case, they alleged that he’d shared insider information with his new employer, the world’s biggest investment fund, BlackRock, that then massively profited from this information.

The Big Short
Sánchez Ortega resigned from Seville-based Abengoa in May this year, walking away with a tidy severance package, a sweet deal for the man who helped sow the seeds of the company’s demise. At the time it was already common knowledge that Abengoa was having financial difficulties; what was not common knowledge was just how serious those difficulties were.

No one had a better idea of the true state of Abengoa’s finances than Sánchez Ortega. Within weeks of leaving the company, allegedly due to heart problems, Sanchez Ortega joined BlackRock as head of strategic development as well as head of the firm’s Latin American infrastructure group. Apparently his role is wholly unrelated to funds trading Abengoa’s securities; it’s pure happenstance that just over a month after Sanchez Ortega’s appointment, BlackRock placed a not insignificant short position – more than 1% of its working capital – against the Spanish firm.

Since that time the company’s short position has waxed and waned while Abengoa’s share price has collapsed 80%. In other words, BlackRock has made untold millions from Abengoa’s fall. What’s more, as one of the world’s most influential market movers, BlackRock’s big short position helped accelerate the Spanish firm’s decline.

Despite still being a felony, insider trading is a broadly tolerated practice in many of the world’s jurisdictions, including the U.S. In October, the U.S. Supreme Court declined to hear a high-profile insider-trading case against Michael Steinberg, who worked at the fourteen-billion-dollar hedge fund S.A.C. Capital Advisors. The court’s decision delivered a potentially fatal blow to the efforts of Preet Bharara, the United States Attorney in Manhattan, to crack down on insider trading in the three-trillion dollar hedge fund industry.

An Insidious Case
The Abengoa-BlackRock case is a particularly insidious example of insider trading, however, for two key reasons: first, the tipster involved had a leading hand in the firm’s billion-dollar downfall and profited handsomely from it. As WOLF STREET reported in August, one of the main causes of Abengoa’s demise was its unrestrained embrace of the dark arts of finiancialization. Like Enron, it used every accounting trick imaginable to conceal the true extent of its debt exposure.

Sánchez Ortega had a frontline role in this process. As he said in 2014, when things get serious, you need to have your wits about you and “Abengoa has always been at the leading edge of financialization.”...MORE
Sustainable Energy Company Abengoa May Not Be Sustainable (ABY)