While US banks have been busy refocusing their "creative financial
products"-time over the past two months, instead defending against allegations
of muppetism, or explaining how hedging is really betting it all on red, and
then doubling down (just because the casino supposedly has the bank's back),
Europe has been busy coming up with new and creative ways of betting on the
demise of FaceBook. While official shorting of the most overhyped and overvalued
company in history only became a reality for most investors today, Europe's
banks have a head start courtesy of "innovated" structured products created by
UBS, Commerzbank and Julius Baer. As Bloomberg explains, "the most actively
traded structured products tied to Facebook since its IPO have been so-called
put warrants, whose buyers profit if the shares drop below a pre-defined level,
in some cases as low as $22, data compiled by Bloomberg show. UBS AG
(UBSN), Commerzbank AG (CBK) and Julius Baer Group Ltd. (BAER) are among lenders
that listed 1,504 warrants and certificates in Europe linked to shares of the
social networking site that were offered at $38....“There has been
strong demand on the put side, with the ratio between puts and calls at around
70/30” with “some people expressing deep downside views,” Heiko Geiger, the head
of public distribution for Germany and Austria at Bank Vontobel AG in Frankfurt,
said in an interview yesterday."
The Facebook strange attractor: magic number 22. With a $ sign. From Bloomberg:
The Facebook strange attractor: magic number 22. With a $ sign. From Bloomberg:
Of course, should FB implode to the degree expected, while on one hand it will subtract meaningful points from GDP growth as retail ends up, once again, poorer, the one biggest winner will be securities law attorneys, who are sensing so much blood courtesy of FaceBook's brand new multi-billion cash hoard, that Zuckerberg will have no choice but to 'invest' almost exclusively in legal defense teams and settlement reserves, leaving him with no time, or money, to find (and fund) the next even lower IRR social-media bolt on acquisition.Bank Vontobel’s best-selling Facebook-linked product is a put warrant that will reward investors if the shares are below $22, the so-called strike price, in December, said Geiger. Put warrants give investors a cash payment depending on how far a stock falls below a set level.
Julius Baer sold the securities with the largest trading volumes, two put warrants with strikes of $35 and $30 on the Scoach exchange in Zurich. Investors traded 402,000 contracts yesterday valued at $335,780 of the former and 603,000 warrants for $322,620 of the latter, data compiled by Bloomberg show.
Zurich-based structured products distributor EFG Financial Products AG added Facebook shares to a basket of 10 social media companies that are tracked by a certificate that has traded on Scoach since last month, it said in an e-mailed statement.
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