Another Hedge Fund Breaks the Law - HBK Caught Short Selling Ahead of PIPESposted by MR WAVETHEORY at 10/05/2006 12:34:00 AM
In a typical PIPE deal, a small, cash-strapped company raises cash by selling discounted stock, or a bond that converts into discounted shares. Shares of the seller usually decline as investors anticipate a flood of discounted stock coming into the market. HBK got in trouble when it shorted shares of Plug Power Inc ahead of a PIPE in which it invested $58 million.
Over the past 5 1/2 years, HBK has invested $598 million in 104 PIPE deals, according to PlacementTracker. People familiar with HBK and the PIPEs market say it's reasonable to assume that HBK made between $50 million and $75 million from those investments.
The fund based in Dallas, Texas, manages $10 billion and employs 200 people. It was founded by Harlan B. Korenvaes, former Managing Director of Merrill Lynch in charge of the firm's convertible arbitrage trading and sales.