Interestingly, on October 2nd, as US stock indices continued to climb, the Wall Street Journal reported that the crisis caused by the subprime mortgage market was essentially over and the US economy would continue to grow...
Then, on October 9th, the Dow Jones Industrial Average reached a record high of 14,164 points.
At this time, many companies' stock prices had reached, or were about to reach, their highest prices in two or three years.
For example, Thomson Group's stock price had risen from approximately $42.50, when it initially planned to acquire Reuters in May, to nearly $47!
Thomson Group's market capitalization had also risen from approximately $27.5 billion at the time to nearly $30.5 billion, exceeding SEM Group's market capitalization by over $10 billion.
This also meant that Thomson Group's proposed acquisition proposal for Reuters would increase its consideration.
Of course, their main task now was to convince the relevant regulators in the US and UK to approve Thomson Group's antitrust investigation into Reuters.
To achieve this goal, in the recent Thomson Reuters acquisition proposal, Thomson and Reuters ultimately had to "reluctantly make a deal"...
They agreed to sell certain databases to allay antitrust regulators' competition concerns.
These included Reuters' secondary market brokerage research reports, corporate earnings forecasts, and macroeconomic databases, as well as Thomson's database of basic corporate financial information.
Furthermore, Thomson and Reuters also agreed to transfer the assets, personnel, intellectual property, and clients associated with the databases, ensuring the buyer could effectively compete with Thomson Reuters in a relatively short period of time.
It can be said that Thomson's gradual concessions to regulators are increasing the likelihood of regulatory approval of the acquisition. Bloomberg, in particular, reiterated to Barron's that according to his information, officials from the Federal Trade Commission (FTC) and the Department of Justice's Antitrust Division have expressed praise for Thomson's concessions and may become more positive about the acquisition in the future...
If the US approves its antitrust investigation into Thomson's acquisition of Reuters, the pressure will shift entirely to British regulators.
However, in early October, Tianhe Capital's Hong Kong-based fund also began shorting Thomson Group's stock price on both the Toronto and Nasdaq stock markets.
This time, Tianhe Capital secured a $1 billion loan from Standard Chartered Bank, using its automotive and real estate holdings as collateral.
Initial Energy Fund (IE Fund) in Hong Kong would use these funds to short Thomson Group's stock price.
As early as September, IE Capital had quietly begun buying Thomson Group shares on the secondary market. Because these purchases were so discreet, they went unnoticed by Thomson Group.
It wasn't until October, when Thomson Group's stock price exceeded $45, that IE Capital began borrowing large amounts of Thomson Group shares from the market.
On October 10th, they launched their first large-scale market sell-off, dumping over $50 million worth of Thomson Group shares in a short period of time.
Although the market value of Thomson Group has exceeded 30 billion US dollars at this time, 70% of its shares are held by the Thomson family's holding company, and the circulating shares in the market are less than 30%...
The first market crash of IE Fund has directly dropped the share price of Thomson Group from 46.25 US dollars to 45.32, a drop of more than 2%. The stock's almost instantaneous 2% drop was highly unusual. Even after the index reached its peak, many stocks were still falling after the market opened. However, the sudden drop in a stock like Thomson, which hadn't been negatively impacted, was still somewhat puzzling.
Consequently, many people rushed to Bloomberg News and other media outlets to check for any breaking news or negative news they had overlooked.
Of course, short selling isn't a one-time deal. After driving the stock price down, IE Capital continued to sell shares at a steady pace.
Furthermore, Baron also released some news through his own media outlets.
Of course, it couldn't be fake news, otherwise the SEC would be questioning him for market manipulation.
Experts appeared in some media outlets that day, analyzing the publicly available information about Thomson's acquisition of Reuters and concluding that it would be difficult for market regulators to approve the acquisition. Otherwise, a new giant would emerge, and the industry would inevitably become a game of oligopoly.
These reports were carefully considered, free of any falsehoods and presenting entirely legitimate analysis.
However, at this time, numerous media outlets were focused on publishing negative news about the Thomson Group acquisition, which inevitably made some Thomson Group stockholders nervous. Furthermore, although Thomson Group's stock price had just reached a high, it immediately fell significantly today, which may have caused some cautious investors to seek safe havens.
That day, Thomson Group's stock price closed at $44.87, down nearly 3% from the opening price.
This first day was merely a tentative move by the IE Fund.
The next day, before the North American stock market opened, news from the UK emerged after the market closed the previous day.
An unnamed official from the UK's Competition and Markets Authority (CMA) stated in an interview that Thomson Group's acquisition of Reuters would be difficult to pass their review. Based on the principle of fair competition, the UK does not want a single large company to dominate the financial consulting industry. This would mean that Bloomberg News and the merged company would have a combined market share of over 65%, which is inherently contrary to fair competition.
Influenced by this news, Thomson Group's stock price opened lower on both the Nasdaq and Toronto Stock Exchanges, below $44.
Within the morning alone, its share price had plummeted to around $42.5, approaching Thomson Group's price in May of this year.
While shorting Thomson Group's stock price was IE Fund's primary focus at this time, Barron's funds had already begun a comprehensive short position across the entire European and American stock markets.
Black Swan Fund had already invested most of its previous capital into shorting US stocks.
Shorting in the European market also accelerated.
In France, William Weber Capital, through the manipulation of NM Rothschild Bank, ultimately secured nearly €2.5 billion in proceeds from a bet, all of which was invested in shorting the financial sector, including banks.
Across Europe, DS Group and its associated funds were also engaged in aggressive short selling.
It can be said that the scale of this short selling was unprecedented. Barron mobilized more than $50 billion in funds across all markets!