Keepers of the Public Trust?

The link:

http://www.thesanitycheck.com/BobsSanityCheckBlog/tabid/56/EntryID/437/Default.aspx

DTCC: " A Little Rape is No Big Deal - Why Is Everyone Bent Out of Shape?"

Location: Blogs Bob O'Brien's Sanity Check Blog

Posted by: bobo 8/31/2006 7:18 AM

The DTCC just released a beautifully crafted piece which highlights the problems with that privately held company.

What is stunning is that whoever put this together was oblivious to the irony it contains.

You can view it here:

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20060831005438&newsLang=en

The piece starts off by saying that it is unable to find any data that corroborates "many" of the facts and statistics used in the recent Forbes article.

Now, first off, Liz Moyer's first rev of her article had one innacuracy, in terms of the trading price. That was only up for an hour or two, that I can recall. In an email to her, she indicated that there was some garbled info from the transfer agent and the company, where something got lost in the back and forth messages.

It changed nothing about the veracity of the story, nor the point of it - incredibly high levels of fails in a company - 27 million fails in a stock with 1.1 million shares issued and outstanding.

The error was corrected almost as soon as the article appeared.

That is the only data that the DTCC is unable to corroborate, yet it makes a point of devoting 1/5 of the piece to the quickly fixed stock price error, and further sets the tone of the release with it.

Would that the DTCC corrected their errors in anywhere nearly that sort of timely fashion. The Global Links fiasco is still unfixed, a year and a half after Senator Bennett demanded and investigation.

The DTCC makes the dollar value of the "error" in the system's handling of the Global Links shares the point of the story. The problem with that is that they fail to acknowledge that the reverse split cut the number of shares by 350. Thus, a share that was trading at, say, 0.02, should have been trading at $7 post split. But more importantly, by not correcting the number of shares trading, the occurrence in Global Links effectively slashed its market cap by 99.7%.

Now, the DTCC apparently feels that slashing a company's market cap by 99.7% is OK. No big deal. It happens. Gotta break some eggs to make an omelet. No need to fix it within a year or two of it happening. Whatever.

What it doesn't say is more important.

It doesn't say that the mistake in re-pricing and re-numbering the Global Links shares, if error it was, should have been corrected within a few days, if not hours, of it taking place. It doesn't say that the market cap of the company was destroyed, diluted down to nothing. It doesn't explain why the SEC didn't immediately stop trading. It doesn't explain why the participants who made the "error" get to keep the money, while the investors and the company lose. It doesn't discuss the windfall profits made by anyone with a huge short position in the stock - possibly the same market makers who traded it as a "mistake."

No, instead it trivializes the issue by using sleight of hand calculations.

But here's the best part. It also shows its true colors with this statement regarding reverse splits:

"However, among sub-penny stocks, these activities may occur more often to try and artificially raise the stock's price."

Huh. "Artificially" increase the price? You mean by reducing the number of shares, thereby legitimately increasing the per share value? That is artificial? Huh. How is it artificial? The market cap stays the same. The share count is reduced, but the price is adjusted to reflect each ownership unit having 350 times more value.

Doesn't it seem that is kind of like trying to blame the victim for doing a split? What is the difference between this statement, and the statement, "However, among hussies and women of loose morals, short skirts are often worn to stir the passions of innocent men" - when explaining a rape?

Does everyone get that this is a private company, owned by the same participants who benefit financially from these sorts of errors, issuing press releases to blame the victim?

And to smear the messenger? Forbes is riddled with inaccuracies, the company is up to shenanigans due to its treatment of its stock. And if you use our math, it's no big deal.

I love these sorts of releases. They underscore how self-serving and one sided this privately-owned entity is, and how uninterested they are in protecting issuers. The message is clearly that, you can reduce the market cap of a company by 99.7%, make short sellers rich in the process, but that's all good. In the scheme of things, it's just another day at the office for the DTCC.

Note no explanation of why 18 months later, nothing has been done to make the company or the investors whole. Note no remorse over it. Note nothing but arrogance and dismissal, and attack.
Anyone surprised? That it took a week is almost as funny as the content of the piece. In addition to being glacial in fixing actions that destroy issuers' market caps, they are not particularly nimble in the PR department, either.