Want to Short IBM? Think Again

On September 24th, 2008, a number of companies (twelve in total) were added to the list of NYSE companies that are on the banned short sale list. These companies included H&R Block, Credicorp, Arbor Realty Trust - and IBM?

Is it just me, or is this an unusual addition to the list?

According to a recent NYSE press release, additional companies can be added to the original list of financial firms that are protected from short-sellers under the original SEC order, but they must be in one of the following categories:

-banks
-savings associations
-registered brokers or dealers
-US and foreign investment advisors, both registered and unregistered
-companies that control or have majority ownership of companies that meet one of the above criteria

Is it because of the company's Finance Segment?

A spokesman for IBM had this to say:

"IBM qualifies for the list because one of its subsidiaries meets the definition of a bank, savings association or registered broker/dealer. IBM has a global financing business that includes leasing and
purchasing, and also has a financial management consulting business as well."

So there you go. IBM is now a stock that you will not be able to short for the foreseeable future. Keep in mind that short-sellers are not touching IBM with a 40-foot pole - only a scant 1.1% of the company's float was being shorted as of September 10th, according to this blog posting on WSJ.com.

IBM's stock is not even doing that poorly. They are currently trading at $116.46, about 14 points under its 52 week high of $130.93. The stock has come down some since the middle of the summer, but nothing so catastrophic that would warrant inclusion on this list. Are short-sellers really conspiring to bring down IBM? Doesn't look like it to me. IBM has dropped 15 points in a few months, but considering the overall doom and gloom in the markets, the move is really nothing to worry about.

Looks to me like IBM flexed some of its muscles and got the NYSE to add them to the prohibited short sale list. How many other companies will attempt to go this route?

Filed under: The Economic Meltdown | General Market News | Stock Market Scandals