Friday, October 16, 2009

Who Owns Georgia Gulf (GGC)?

Let's talk more about the bond funds that now own Georgia Gulf Corp (GGC).

FMR (Fidelity) is the largest holder and owns 8,986,271 shares which is 27.286%.
Capital World Investors owns 8,770,360 shares which is 26.6%
Pioneer High Yield Fund has 3,374,442 shares or 10.23%, with various other Pioneer funds owning more.

I am trying to think about what these guys are thinking. There is no way you can sell 9 million shares of a stock that trades 200,000 on a big day.

So maybe they won't try? Their incentive is to try to keep the price up so as to keep the NAV of their funds up. (Although, if I was in their shoes I would just sell unemotionally. Space it out over a few days, but sell.)

Maybe they will even buy a little - in for a penny, in for a pound - from the really small holders. Maybe that is what the bid has been the past few days.

No, the risk is the people - and there are a few dozen - that own 50,000 to 500,000 shares. They could make a clean dump over a few day period and recover most of what they paid for the bonds which they exchanged for equity.

This is a prisoner's dilemma among the really large holders. It would be best for them to work together soak up the shares from the small holders and prop up the price on their vastly larger holdings. But they would be throwing away money on overpriced shares. Someone would want to shirk the duty.


eh said...

Maybe they will even buy a little - in for a penny, in for a pound - from the really small holders.

I can't imagine that happening. I mean, they must have people who can and have done the same analysis you have, and come to the same conclusion: the common of this company is toast. So why throw good money after bad. I mean, what is the earnings potential here?

CP said...

The problem with these big funds that own thousands of stocks is that they don't pay very good attention to their positions.

Take Downey (DSL). I beat the drum about Downey for almost two years before they folded.

There was no debate that Downey had been a reckless lender that would fail. Yet these funds wouldn't sell. They don't pay enough attention, and when they do, they make psychological trading mistakes.