NFI Short/Hedge Fund Fun Facts
The following are a list of verifiable facts relating to the hedge fun/short situation with NFI.
Fact: In July, 2002, a massive short attack began against NFI.
Fact: Daily trading volume before the attack was roughly 75-90K shares per day.
Fact: NFI was valued at between a 4% and 10.5% yield before that attack.
Fact: NFI is currently valued in the 15%-20% yield post attack.
Fact: Average yield for an MREIT is 10% or so.
Fact: NFI is currently trading at a 60-70% discount to peers.
Fact: David Rocker is the single largest shareholder of TSCM.
Fact: David Rocker first appeared on the Q3 2002 (October) NFI conference call asking a bunch of off-base and innuendo laden questions.
Fact: Thestreet.com (TSCM) did start a bashing campaign not too long thereafter.
Fact: Jim Cramer is Rocker's partner at TSCM.
Fact: Cramer repeatedly makes the provably false statement on his radio program that NFI doesn't have the money to pay their dividend, in spite of the fact that they clearly do, every quarter.
Fact: Elliot Spitzer (NY DA) was an investor in Cramer's hedge fund.
Fact: Spitzer did go to school with Cramer.
Fact: Spitzer's office has been appraised of the situation and has responded that that's not their job (paraphrasing), in spite of the fact that they felt it clearly was their job with Canary Capital hedge fund.
Fact: Rocker was also on the Q1 2003 NFI conference call and raised a number of easily rebutted “concerns.”
Fact: Several of Rockers already-rebutted "concerns" were echoed in Liz McDonald's articles of May 8 and May 15 in Forbes online, and repeated in Forbes print edition the same time. She advised readers to short the stock (low $40’s at the time) and cover at $20.
Fact: Liz McDonald also hyped Martha Stewart Omnimedia as her best single long stock idea on Forbes on Fox.
Fact: MSO was a $13.5 million (1.438 mm share) holding by Rocker Partners in the June 30 SEC filing. It was $10.6 MM (1.291 MM shares) in the Mar 30 SEC filing.
Fact: NFI's shares have enjoyed a unique characteristic unlike any other on the NYSE – the majority of trading days they are striped down in after the bell trades.
Fact: The only person that benefits from that routine striping is someone with a short position that needs to adjust their overnight capital requirements.
Fact: Unknown entities have systematically used the Pacific Exchange to lower the trading range of the stock before the open.
Fact: David Rocker does control two offshore hedge funds - Helmsman Holdings and Compass Holdings.
Fact: Both Helmsman and Compass were on the Q2 2003 conference call asking off-base questions laden with innuendo.
Fact: Offshore as well as domestic hedge funds have been found guilty of naked shorting.
Fact: David Rocker does have 244K shares in his long account.
Fact: Those shares could be used to circumvent the "no short sale on a downtick" rule as there are no restrictions on long shares.
Fact: Numerous trading days a long account has dumped a large slug of shares at the opening bell or shortly thereafter, beginning a sell-off.
Fact: 244K shares is almost two days' trading volume for NFI pre-short attack July of 2002.
Fact: 185K of those shares in Rocker's account have no voting rights.
Fact: Thinly traded stocks like NFI would be relatively easy to manipulate if one had a large amount of money, over one day's average volume of shares in a long account, had control over multiple entities in multiple jurisdictions, and didn't mind bending about a dozen or so laws.
Fact: The SEC and NYSE are overloaded with much larger problems, so the likelihood of them doing all the heavy lifting to establish beyond a reasonable doubt that manipulation is indeed going on is slim.
Fact: In the cases where naked shorting was proven, the fines have been far lower than the amount of money likely made from that practice.
Fact: Several of the companies that have had large short positions and negative commentary from Thestreet.com have had frivolous class action suits brought against them.
Fact: Those class action suits dramatically depressed the share prices temporarily.
Fact: Anyone short on those companies were able to cover at 30% of the price they would have had to before the suits.
Fact: There is no clear exit strategy for whoever is short at the moment - NFI continues to make money hand over fist, the market and sector have never been better, and the dividend keeps increasing.
Now, you can put those facts together and draw your own conclusions. It is true there is no videotape of “the big boss” signing trading orders to dump at the bell while instructing his counterparts at an offshore hedge fund to initiate manipulative trading on the Pacific exchange. It is also true that there will likely never be one.
Connect the dots. Where there’s smoke, there’s fire.
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