Nigel Lawson did have a point as this piece in the Telegraph about Interserve shows. That point being that the newspapers, especially the financial pages, aren’t necessarily written by those who actually know how things work. A facility with words does not, alas, a great economist make. So, when those finance pages were criticising what Lawson was doing as Chancellor he dismissed them as mere teenage scribblers. A proof of which we have today:
A Scottish multi-millionaire who made his fortune as a dealmaker in the pub industry is spearheading an unlikely rescue bid for troubled outsourcer Interserve.
Alan McIntosh is the serial investor behind Emerald Investment Partners, a private equity vehicle emerging as a key player in the FTSE 250 contractor’s refinancing discussions. He is said to be worth more than £100m.
Emerald has spent tens of millions of pounds scooping up Interserve’s debt in the secondary market. Existing lenders including Barclays and Lloyds have been selling down their positions for as little as 50p in the pound, keen to reduce their exposure to the outsourcing sector after Carillion’s implosion.
No, that’s fine and a perfectly reasonable – time will tell if sensible – investment strategy. The company survives and the debt will rise in value. It fails and if you own enough of the debt then you’ve a blocking vote on the disposal plans, possibly being able to negotiate a debt for equity swap etc. The bones could well be worth picking.
That’s all fine and this isn’t:
Interserve’s survival would deal a blow to a gang of hedge funds that have waged multi-million pound bets on it following Carillion on to the scrap-heap. Four hedge funds have upped their stakes in recent weeks, betting that its share price will fall even further, despite already trailing at all-time lows.
Those hedge funds have all reduced their negative stake further, not increased their positive one. If you think a share price is going down you do not then go long by buying shares, upping your stake. You go short, sell shares you don’t own, reduce further your stake that is.
Yes, we’ve still teenage scribblers on the finance pages. Those still not yet with the maturity of years to know when they’re spouting cobblers.
On the other hand, things do get better. Lawson himself started out as a teenage scribbler, didn’t he?