The first year as a listed company did not quite go to plan for Kevin Davis and his team. Paul Francis-Grey reports
MF Global’s first year as a listed company has
been an eventful one. It went smoothly for the first six
months, but since the start of 2008, the share price has been
subject to fierce movements, wide criticism and then strong
support from the company’s chief executive, Kevin
MF Global appeared on New York Stock Exchange in July 2007
as the incarnation of Man Financial. Having been slated for an
opening listing of $30, the share price slipped away from
analysts’ predictions fairly steadily and, by
August, was hovering at about the $25 mark.
Davis described its listing as coming at "the most difficult
of financial times since the great depression" in an interview
with FOWeek in June. With the power of hindsight, it was surely
a victim of the impending credit crunch, which was starting to
rear its head. For the rest of the year the futures brokerage
began to recover and climbed back up to a respectable $30
level, but for a few, even this seemed undervalued.
Then came 2008. The listed derivatives industry arguably
suffered its biggest set back early on with
$3.2 billion loss because of rogue trader Jerome Kerviel and
his wrong way bets on Eurex trades. It was not until the end of
February that MF Global experienced its own knock back. Evan
Dooley cost the company $141.5 million-worth of losses playing
wheat futures. Perhaps more damaging was the blow to the
company’s reputation as a leader in risk
In retrospect, when what was later to follow is taken into
account, MF Global’s share price took a relatively
modest dip after this event. Initially it lost about $7 and
then fell below the $20 for the first time. There it continued
to trade until March 17 when a further 65% was wiped off its
value after a series of unfounded rumours drove MF Global to
trade at a low of $3.64.
Davis, in a somewhat understated manner, says: "I
wasn’t thrilled that day." But he and the rest of
the company have since been striving to control the price and
put in place initiatives to secure its future.
One such move was the appointment of an outside investor in
the shape of JC Flowers. The investment company has piled $150
million into MF Global in an attempt to meet bridge loan
payments that could threaten its future if not met. Davis
describes JC Flowers’s investment as much more
than just a monetary hand out.
"The very fact that Chris Flowers [JC Flowers’s
chief executive officer and founder] made the commitment to
invest in us is a ringing endorsement of the value of our
business. Chris and his team are universally regarded as among
the brightest people in the financial world today. Having
access to Chris and his team will be an enormous benefit to us
as we continue to seek out strategic opportunities for the
company. I don’t think you will find there will be
any changes to our business model. This is something that has
evolved over time and we are very much a company that believes
in evolution, not revolution," he says, again showing his own
confidence in the brand that he has built up over a nine-year
period since becoming chief executive.
More tellingly for the company is how it fairs in the next
year and beyond. With the outlook on the futures
industry’s growth being judged less bullishly than
for a long time, share prices of some of the largest listed
exchanges stuttering for the first time, an ever-growing
environment of mergers, consolidation and aggressive takeovers
and a vulnerable share price still hanging over the once
championed brokerage, there is uncertainty surrounding the
However, what MF Global has that other companies may lack is
a chief executive of Davis’s stature and
respectability. Having built the company into a leading pioneer
of electronic futures trading and a model that others have
followed is something that will be in his favour when the chips
With a market still reeling from an ongoing credit squeeze
and with an over-the-counter derivatives market still holding
its head, MF Global’s business should recover to
What has become clear, though, is that nothing in 2008 is
set in stone and all expectations should be altered
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