Is Penson Worldwide $PNSN the Next Lehman or Bear Stearns?
I am a big believer in the phrase “where there is smoke there is fire” and the chart of $PNSN was broadcasting trouble well before the stock was halted for news dissemination today. A quick glance at the chart shows there was trouble before today’s “news”. Over the last month, the stock lost nearly 50% of its value, then “bad news” came out, the stock was halted and when it reopened it went up, not much, but it did rally slightly. “News and surprises tend to follow the trend”
I skimmed the news, something about racetrack bonds which may not have been properly accounted for, truth is I don’t really care about the stock, it is just one of thousands of tickers to choose from in trading. I guess I care about the company a little, it sucks when businesses go under and loyal employees lose out. I hope Penson doesn’t go out of business, but for my own selfish reasons.
Penson clears trades for many brokerage firms, particularly for firms where the customers are active traders (like me). In fact I have accounts at two different firms which clear through $PNSN and that is my primary concern, how will it effect me? Greedy selfish trader thoughts, I know.
I commented on twitter that I was going to go home in cash in the accounts which clear through PNSN because if there were big troubles I didn’t want to be stuck in a stock which I might not be able to trade. Being in a trade without the ability to trade it is a terrible position to be in. If another company had to come in to takeover the accounts which clear through $PNSN there is less likelihood of an error if cash is transferred instead of equity positions.
People tweeted back that the company released a statement which basically said everything was okay with their business. I have no reason to distrust the people at Penson, but billions of dollars were lost by people who were duped into believing there weren’t problems with the management of Lehman Bros $LEH Bear Stearns $BSC or hundreds of other companies who lied to shareholders while their businesses imploded. Where there is smoke…
Trading is an ultimate survival of the fittest business, and rule number one is risk management. If the company goes out of business the S.I.P.C. will make sure customers don’t lose, but that doesn’t mean things would go smoothly. I am cautious by nature, that is why I have survived as a trader for so long, if it smells bad get the hell out! I am not going to close accounts, I have faith in the bigger picture that the system will continue to function and that customer assets are safe, but I wouldn’t buy any stock in a downtrend because the management says things are okay!