Hedge Fund To
By Adam Porter
12 December, 2004
former equity trader who made his fortune on Wall Street has created
a hedge fund to attack The Coca-Cola Company.
American Max Keiser
has teamed up with some other "high net worth individuals"
to create a boycott-based financial assault on the American multinational
that has its headquarters in Atlanta, Georgia.
The hedge fund will
attempt to "short" the share price of The Coca-Cola Company.
"Shorting" (also known as "laying" or "going
short") works in the following way.
You phone your broker.
The broker will effectively lend you the stock of a company for a given
period of time, say six months. You will be required to return the amount
of stock you have lent on that day. Let us say that you borrow 100 shares
at a value of $100.
Then you immediately
sell the stock for its current value, which is $100. You then hope that
the value falls - that is your bet, or "short position".
So when the six-month
period is up, your broker wants his stock back (your broker takes a
commission whatever happens). If the value of the stock has fallen to
$50, then you buy 100 shares at $50 and give them back to the broker.
Your broker has
back his 100 shares but you have made $50 profit as you sold the original
stock for $100 and have only had to give back shares worth $50.
Of course if the
stock goes up in value instead of falling, you will lose. Shorting is
a very risky financial transaction.
"But our fund
is different," Keiser told Aljazeera.net from London. "We
will create a fund based on the amount of people who come and register
with us at www.karmabanque.com to boycott the product.
He added: "The
more people join our boycott, the more money will be pumped into the
fund. The more people join the boycott, the bigger the signal becomes
to the financial community to sell their shares."
The trader hopes
that boycotts will be a way that communities around the world can show
their anger at US foreign policy.
anywhere, in the Middle East or anywhere else, can use this fund to
monetise their dissent"
participate. All you need to do in this case is boycott "Coca-Cola.
Any community anywhere, in the Middle East or anywhere else, can use
this fund to monetise their dissent. Rather than taking on a whole load
of risk themselves, they can use our fund to do it," Keiser said.
"We have created
something called the boycott vulnerability ratio (BVR), which sounds
a bit crazy but is in fact very simple. It is the full value of the
company, or market capitalisation, divided by their sales. Coca-Cola
is simply the most vulnerable at the moment as it is trading at its
Keiser added: "It
could have been another company like Exxon-Mobil, as a lot of people
would like to attack Exxon. But right now Exxon are not vulnerable to
a boycott. Coca-Cola are, that is why we picked them. If you start to
subtract sales from Coca-Cola, their share price begins to look very
This unique strategy
is cemented by Keiser's own desire to use the financial markets to help
undermine US superpower status.
"We are not anti-capitalist. We are anti-imperialist and anti-monopolist.
Coca-Cola has been chosen because the stock is American and it is vulnerable.
It is already sucking wind."
He said, "It
is trading near its lows and this is just another signal to ditch it.
The world no longer has any faith in the United States to help create
a stable global economy. Rather they are fearful of what America might
Keiser says he has
not been short of those wealthy people who think the gamble is one that
can pay off.
"We have already
received a lot of attention from investors. We have set a maximum number
of investors at 99. Obviously they have to be high net worth individuals,
but we already have enough money to start the fund."
The fund has been set up in conjunction with the British environmental
magazine The Ecologist, which is also bringing people into the boycott.
"As for the
profits from the fund, they will be given back to victims of Coca-Cola.
When we say victims we mean the people in Colombia who have fallen foul
of Coca-Cola's anti-union activity. Or in India, where Coca-Cola is
tapping water supplies away from local farmers."
So rather than work
for a set of private clients, Keiser sees the aim to take profits out
of corporations and give them back to ordinary folk around the world.
been a lot of talk recently about the end of the bull market. Well,
I don't think this is the reality of the situation. There is a huge
bull market waiting to be tapped and that is the bull market of dissent."