Efficient markets – WestLB Genußschein edition

As a quick follow up to the previous post, a quick reminder how innefficient the markets in those securities can be:

WestLB came out with their press release at 11 am CET yesterday. As discussed in the last post, the release started with a very small loss on a consolidated level. If the consolidated loss would have been mirrored in the local GAAP accounts, this would have meant a payout for the Genußscheine of around 95%.

However further down in the release they mentioned “casually” that the nominal repayment will only be 85.1% due to a higher local GAAP loss.

Interstingly, between 11:02 and 11:11 yesterday, aroudn 380 k of the Genußscheine were traded at 91%, which was clearly an inefficient price if one would have read the whole press release.

Unfortunately, I did not have the time to react on this, but some lucky guy found some lazy guy who didn’t fully read the release.

This is something which can be observed with a lot of these bonds. Information only gets priced in after a certain time lag. Something to look out for.

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