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A rogue oil trader in Singapore cost Mitsubishi $320M by disguising unauthorized transactions as hedges for his customers. Was that wrong?
Not the first time
Apparently, he had been warned before, as he had ‘repeatedly’ taken unauthorized positions since at least January by manipulating data in the risk management system. The latest derivatives trade in question, initiated in July, was timed poorly, to say the least, as Brent crude dropped 16% from its July peak to the beginning of August, and was closed well before the 20% surge in pricing associated with the recent Saudi oil disruption.
Mitsubishi’s Singapore unit, Petro-Diamond, closed its position once it realized it could lose money on a trade that was not for an actual customer. As for the bad boy trader, he was fired last Wednesday and reported to the police the next day.
The big reveal
And who was this mysterious man? Rumor has it that it was none other than Wang Xingchen, also known as Jack Wang. Calls to his cell phone would not connect`, but something tells me he might want to put a different name on his resume when applying to new gigs.
The bottom line …
Mr. Wang wasn’t the first to go rogue in the oil industry, and he certainly won’t be the last. Metallgesellschaft lost $1.2B when a hedging strategy failed in 1984, and just last year Unipec lost $656M betting the wrong way on crude (you win some, you lose some).
Mitsubishi’s financials shouldn’t be materially affected by this, as the $320M is less than 1/10 of its projected profit of $5.6B. As for oil prices, they were unmoved by the news, but are down 6.9% overall in the past week.
THE WINDS OF CHANGE
We Co. CEO Adam Neumann has a case of the Mondays. A group of directors at the firm are going full-blown coup on his candy ass in an effort to oust him. Rumor has it that a board meeting is on the calendar and the topic of discussion with be pushing Neumann into a nonexecutive board role with the company.
Show your faces
So, who wants to cancel Neumann? Let’s start with SoftBank. According to reports, a group of officials connected to the WeWork investors is calling for Neumann’s well-groomed head. Among those SoftBankers looking for change is SoftBank CEO Masayoshi Son himself.
Son is allegedly the ringleader of the coup, and while he once supported Neumann in the form of a hefty investment that brought WeWork’s implied valuation to $47B, it appears that Masa is looking to keep the company private to avoid a massive write-down.
It’s likely that any kind of revolt will mirror Benchmark Capital’s removal of Uber CEO Travis Kalanick before Uber IPOed. It’s worth noting that SoftBank invested a 15% stake in Uber after the move and could be preparing a similar gameplan.
Those looking to push Neumann out will need to be careful, however, as Neumann still has some friends on the board who aren’t tied to Son and SoftBank. Plus the aspiring “President of the World” also holds the number of shares required to fire the entire board if push comes to shove.
The bottom line …
If all goes according to plan, SoftBank will have its way and WeWork won’t be going public anytime soon. Keep in mind that WeWork still desperately needs SoftBank’s support to keep the ship afloat. Either that or Neumann goes scorched earth and fires everybody. There’s nothing to do now, but grab your popcorn and enjoy the show.
IN OTHER NEWS
- Turtles be damned! Donald Trump has granted exemptions on over 400 products coming from China, including plastic straws, Christmas tree lights, and dog leashes. In total, the restrictions were removed from 437 products that were part of the initial $250B imposed by the US on Chinese goods. Turns out after all this hoopla, the world’s biggest economies agree that we should find a middle ground. The exemptions will last until August 2020.
- Your favorite non-Apple wearable company may be in the market for a new owner. Fitbit has allegedly hired boutique investment firm Qatalyst Partners to help it explore a sale. Per the unnamed (read: soon to be discovered and fired) sources, Qatalyst is encouraging Fitbit management to sell. One potential suitor is a large tech company whose name rhymes with “McDougal” (it’s Google, you guys). The news sent Fitbit stock up almost 12%.
- If you’re heading down to Wally World (Walmart) to restock your vape cartridges, we’ve got some pretty bad news. The Waltons have announced that the company will no longer be selling e-cigarettes of any kind in its US stores. The move coincides with reports that vaping has been linked to multiple deaths and POTUS announcing a proposed ban of flavored e-cigs nationwide. The world’s largest retailer sells Juul and some lame AF brands. Looks like America is going to have to go back to cigarettes and die of well-known diseases like the good old days …
- In addition to the exemptions on tariffs announced by President Trump, Apple specifically has been granted 10 exemptions on its products coming into the US of A. The big items are a power supply and logic board that Tim Cook’s company produces. The exemption covers products dating back to September 2018 and will last through August 2020. Apple will receive a credit for the previously taxed shipment … must be nice. The financial impact wasn’t relayed but in the words of Larry David it’s “pretttttty, pretttty, pretty good.”
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