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TEPCO and the Case of the Mysterious Stock Purchase

April 22, 2011

Photo by Ed Siasoco. Some rights reserved.

As workers were still toiling to bring the situation at Japan’s dangerously damaged Fukushima Daiichi nuclear power plant under control, another event occurred last week that has left Japanese regulators and Tokyo Electric Power Company (TEPCO) executives searching for answers.

It still remains unclear who is behind a recent series of trades, valued at $600 million, which brought approximately 10% of the Japanese utility’s shares under control of a single entity. However, the size of the trades executed during the week of April 3rd isn’t the only thing raising red flags: the trades occurred at a time when the company’s potential liability for the disaster remains largely unclear, when as many as a fifth of the company’s shares were being dumped by panicked investors and the deal was structured to bypass Japanese securities laws requiring shareholders of 5% or more of public companies to disclose their identity has more than a few people raising an eyebrow.

“They’re really, really pushing, trying to figure out who it was,” an unnamed TEPCO executive said of the regulators in a recent New York Times article. “There’s somebody out there that holds a whale of a position, and structured the position in such a way that they don’t have to file” a mandatory disclosure.

So who are the likely candidates? Japanese officials are already looking into the possibility that a Chinese sovereign wealth fund is behind the move.  This suspicion is no doubt in reaction to China’s refusal to ship rare earth minerals critical to the Japanese manufacturing sector for two months last fall as part of a power struggle over islands in the East China Sea.

Another possibility is a hedge fund looking to maximize earnings by purchasing the stock of a company it deemed too big to fail at a time when  shares were trading as low at $3.51.

Considering the interconnected and global nature of today’s major banks its possible the money could have come from just about anywhere, including within Japan itself. A fact, one could assume, that has those charged with solving the mystery wondering where Scooby-Doo is when you need him.

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