Tuesday, June 21, 2011

John Paulson Takes Potential $720M Loss on Sino-Forest

Even for a $37B asset base, a potential $720M loss is quite traumatic.  It appears this is what happened to John Paulson in the Sino-Forest blowup, unless there some some hedging on that specific position going on.

Via Bloomberg:

  • John Paulson's $37 billion hedge fund sold its entire stake in Sino-Forest Corp. (TRE), the Chinese tree-plantation owner accused of overstating timber holdings, dealing investors a potential C$705 million ($720 million) loss.
  • Paulson & Co., which held 34.7 million shares of Sino- Forest as of April 29, said in a filing yesterday that it had disposed of the stake as of June 17. The New York-based firm’s holding was worth C$815.80 million when it was disclosed. Its value had dropped to C$110.69 million by the end of last week.
  • The investment is a public misstep for Paulson, 55, who’s betting on an economic recovery after making $15 billion for his backers in 2007 wagering against subprime mortgages. His largest fund lost about 13 percent in the first half of June, bringing declines this year to about 20 percent, as bets on Sino-Forest and U.S. bank stocks soured, two investors said last week.
  • “Paulson is under the limelight on this investment,” said Steven Persky of Dalton Investments LLC, a Los Angeles-based fund with $1.3 billion in assets. Still, “any money manager is going to have some losing trades, it’s part of life.”
  • Sino-Forest has slumped 85 percent in Toronto trading since June 1, the day before Muddy Waters LLC, an investment firm run by Carson Block that’s betting against the stock, said the forestry company overstated its timber holdings. Sino-Forest has said Block’s statements are false.“
  • Due to the uncertainty over Sino-Forest’s public disclosures and financial statements, we have sold our stock and await the results of the independent committee’s investigation,” Paulson said in an e-mailed statement.  
  • Paulson owned Sino-Forest shares since at least March 2008, when the firm reported holding a 10 percent stake in the company, enough to trigger Canadian reporting requirements. By June 2009, Paulson owned 40.7 million Sino-Forest shares, a 19 percent stake, according to filings with regulators.

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