Asymmetrical Information

It is certainly appropriate for the NYSE to halt trading when it is apparent that the public information about a company is fraudulent. It is unfortunate that investors were not able to sell their shares, but in the absence of accurate information about the company's financial condition, it would certainly not have been fair to subsequent purchasers to allow trading to continue.

On the other hand, when it becomes publicly known that public information about a company is fraudulent, then that fact in itself becomes part of the public information about that company. Why favor slightly more aware future purchasers over unaware past purchasers of a stock?

I think that when the company announces that its ceo owes them 400+million on friday, that the ceo "resigned" on monday, and then said ceo is arrested and indicted on tuesday, everything material about the company is known.

the entire world assumes that they are bankrupt and crooked, so anyone buying is looking to be a vulture and is knowingly taking on a very large amount of risk. when the feds are ticked off enough to arrest a ceo in a sweat shirt and make him appear in court and leave the building in such attire, there is big trouble in little china. Everyone gets a change of clothes, even the guys arrested on COPS in their stained wifebeaters are allowed to change clothes for the arraignment and walk out of the building if they make bail.

I was thinking about buying shares in REFCO, on the off chance that they avoided liquidation and managed to pull off a sale, or the possibility of being part of a class against thomas h lee and the underwriters. The poor schmucks that held REFCO stocks should have been able to get out if they didn't want to stick around for the various class actions and settlement offers.

It seems like the stockholders will not be completely wiped out, although the various firms involved in bringing REFCO public are in deep deep trouble. This might be the end of Grant Thorton, given their previous involvement in Parmalat's corrupt subsidiaries in the Caymans.

Truly though, there was no other shoe to drop, just a waiting game to see if the firm went into Chapter 7/11. Once sufficient information is out (the perp walk), let trading free.

Time and again, stocks have continued to trade, even after they have filed plans of reoganization stating that the existing common will be extinguished without compensation.

It's certainly appropriate for the NYSE to exercise the internal rules that govern it. For a company to be listed on the NYSE, it must meet certain requirements and agree to follow these rules. The rules are part of the bundle of rights that an investor acquires by buying a listed share. As for fairness, the NYSE's discretion to suspend trading is something that the company and its owners consent to by the listing and share acquisition process. The risk of bankruptcy or a normal drop in share value is a risk every investor takes. As for accusations of securities fraud, the rules governing the resolution of these claims are also part of what investors consent to, including the NYSE's rules, which may cause individual loss. In other words, tough noogies.

Hmm. Apparently entering "none" into the URL field gets you the website for a band. It's not mine, needless to say.

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