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Did The FSA Ruin The HBOS Rights Issue?

While it was all done with the right idea in mind it seems as though the Financial Services Authority (FSA) may inadvertently have ruined the £4 billion HBOS fund raising after introducing the recent short selling rules in relation to shares where a fund raising is taking place. This promoted the confirmation of large short positions in HBOS over the last few weeks and some believe that this led to a self fulfilling prophecy - short sellers confirming their positions and investor spooked as to why they were taking a short stance.

There is one thing which the market hates, uncertainty, and the fact that the short sellers were all forced out into the open led to some confusion in the market. Publically the idea was to flush out short sellers, but in private it was supposed to be a helping hand to ensure that vital rights issues were allowed to succeed in the current market conditions.

There is speculation that the FSA will use the relative failure of the HBOS rights issue to push for changes to the timetable for fund raising. The UK method has for some time been seen as too long and cumbersome and something which does not reflect well on the faster US method.

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