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Asset Management Culture

Aussie Pension Suspends Its Short Selling-related Stock Program

Unisuper cites its ineffectiveness in helping the current market situation.

By Steffan Navedo-Perez

The A$85 billion ($53 billion) UniSuper pension fund announced Monday it has indefinitely suspended its stock lending program, citing the restrictions of short sales as being part of an effort that will help ease market conditions back to normal.

“In a normally functioning market, we’re comfortable lending our shares as we genuinely believe that it adds to market efficiency. The ability to short sell adds to liquidity and price discovery in an orderly market. However, we are now in a market gripped by panic and we believe that restricting the ability to short sell is in the best interest of promoting a more orderly market,” Chief Investment Officer John Pearce said.

The fund’s custodian, BNP Paribas, has been ordered to immediately retract all shares currently out on loan, without exception.

The move by UniSuper follows that of a similar action by Japan’s $1.49 trillion Government Pension Investment Fund (GPIF), which suspended its stock lending program short selling on its conclusion that the trading method creates a trading gap that is “inconsistent” with its stewardship responsibilities, which include improving the long-term value of investee companies.

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Tesla and SpaceX CEO Elon Musk responded to the Unisuper news with: “Bravo, right thing to do! Short selling should be illegal.” Musk is a long-time critic of short selling, which ultimately bets on the shares of a company’s stock price falling. Tesla is one of the most-shorted stocks in the United States, regularly having the equivalent of 20% of its outstanding shares in shorted shares. “They’re jerks who want us to die,” Musk said in a Rolling Stone interview several years ago.

International markets continued their sell-off around the world, and the ASX 200 index closed down 9.7% on the eve of the pension’s announcement, while the S&P 500 fell nearly 12%.

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Home > News > Risk > Michigan Pension Fund Sues World Wrestling Entertainment
Risk

Michigan Pension Fund Sues World Wrestling Entertainment

WWE lawyer calls accusations of insider trading by CEO Vince McMahon ‘entirely fictional.’

By Michael Katz

The City of Warren Police and Fire Retirement System in Warren, Michigan, has filed a class action lawsuit against World Wrestling Entertainment (WWE) that alleges the sports entertainment company and certain senior executives made false and misleading statements regarding a distribution deal in Saudi Arabia. It also accuses CEO Vince McMahon of reaping $261 million from insider trading.

Also named as defendants in the lawsuit are WWE’s former co-presidents George Barrios and Michelle Wilson, who are also accused of insider trading.

The case is centered on WWE’s strategic relationships with Saudi Arabia, a multi-year television distribution rights agreement with direct broadcast satellite provider Orbit Showcase Network (OSN), and a 10-year partnership with the Saudi General Sports Authority to host live events in the country.

The complaint alleges that during the class period, which dates from Feb. 7, 2019, to Feb. 5, 2020, WWE executives made false and misleading statements and failed to disclose that the company was experiencing problems with the Saudi government and that negotiations over a renewed broadcasting distribution deal had broken down.

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“WWE did not have the ability to expand its operations in the Middle East or within Saudi Arabia as had been represented to investors,” said the lawsuit, which added that analysts estimated the failed partnership would have been worth about $500 million to WWE.

The suit also claims the company hid the fact that the Saudi government and its affiliates had failed to make tens of millions of dollars in payments owed to WWE pursuant to existing contractual commitments between the parties.

“The dispute spiraled out of control, culminating in a decision by WWE to cut a broadcasting feed of a live event held in the country,” the lawsuit said. “In retaliation, the Saudi government temporarily refused to allow several WWE wrestlers to leave the country in what was later described as akin to a ‘hostage situation’ under the pretense of mechanical airplane issues.”

The complaint alleges that problems with WWE’s relationship with the Saudis began to be revealed in a series of partial disclosures that began in April 2019 when the company disclosed disappointing financial results and fiscal guidance. The suit says several analysts connected the financial results to adverse issues in the company’s dealings with the Saudis.

The lawsuit claims the disclosures caused the price of WWE’s shares to plummet from a class period high of more than $100 per share to as low as $40.24 per share on Feb. 6, 2020, representing a 60% share price decline.

“However, the company’s most senior executives … took advantage of WWE’s inflated stock price to sell millions of dollars’ worth of their own WWE shares,” the lawsuit sai.

The suit alleges that in a single stock sale, McMahon sold more than 3.2 million WWE shares for over $261 million in “gross insider trading proceeds.” It said the sale occurred with only a few days left in the company’s first quarter of 2019, adding that “outside investors were not so fortunate, suffering hundreds of millions of dollars in losses and economic damages.”

Jerry McDevitt, a partner at law firm K&L Gates who is the outside counsel for WWE, said the accusations are baseless and that the case is without merit.

“The lawsuit constructs an entirely fictional storyline based on false and fabricated internet gossip, not facts,” McDevitt told CIO. “And we will move to have it dismissed.”

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