Things may not be getting much better for MF Global but for now execs and shareholders of the huge futures broker may be satisfied with things not getting worse. In late February, the firm was forced to unwind unauthorized trades placed by Evan Dooley, the Memphis-based “rogue trader” who exceeded authorized limits while trading wheat for his own account, causing a $141.5 million loss. Then on March 17, in the shadow of Bear Stearns’ fall, MF Global stock plunged to $3.64 per share after opening at $16.10. It closed at $6.05 for the day, pushing the company to release a statement that investor Joe Lewis, a major Bear Stearns shareholder who reportedly lost $900 million in the collapse, wasn’t an MF Global client and offered details on its lack of exposure to shaky repo lines of credit and subprime mortgage related securities.
With blood in the water, no fewer than three class action lawsuits were filed against the firm; two alleging MF inflated the stock price by making material misrepresentations to the market and a third alleging misrepresentations of operations and internal controls.
MF hired TD Ameritrade executive J. Randy MacDonald as CFO and also modified an agreement with Man Investments that will free as much as $800 million of its existing liquidity. It came just one week after a statement that MF held $1.4 billion in unused committed liquidity facilities and that “rumors regarding its liquidity position are without merit.” The company maintains that volumes and net revenues are higher than at the same time last year, and that client funds were higher than before the $141.5 million loss. From Jan. 31 to Feb. 29, customer segregated funds increased more than 25% to $13 billion from $10.4 billion. In a press statement, the company said it “has raised margin requirements as a result of continued market volatility and dislocations.”
That figure may change once the March figures are in as some brokers have reported a flight of business from MF Global after the twin black eyes it suffered this winter.
