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More on securities fraud and sulfur

 


Let us return to as subject broached last week, the US Supreme Court's decision in MACQUARIE INFRASTRUCTURE v. MOAB PARTNERS. 

As I noted, the case involves the private (tort) use of an SEC rule, 10b-5, and it says that the omission of material facts by the issuer of securities will NOT present a cause of action in tort by a buyer of the securities unless the omission is such as to render statements that actually WERE made by the company misleading.  

Today I'd like to say something about the specific underlying issue. Some of Macquarrie's most valuable assets are terminals for the storage of fuel oil. Its terminals are designed to accommodate high-sulfur fuel oil. 

What Macquarrie neglected to say, setting up Moab's ire and this lawsuit, is that under the influence of a United Nations rule relating to climate change, high sulfur fuels are getting phased out around the world. That's a good thing.  But it is a very bad thing for the value of the Macquarrie assets that it will render obsolete.    

The usual bald statement of this case raises hackles from both America-First nationalist and anarchists (of all variants). The UN.  That blue-helmeted pipsqueak effort at global government?  Has their takeover proceeded so far they can give rules to and destroy the value of assets of private companies?

Well ... high sulfur fuel is generally used in shipping. In 2016 the International Maritime Organization, a UN sponsored institution, limited the sulfur content of the fuel used in shipping.  Major shippers, most of which are headquartered well outside of the US, and generally in countries that follow the Paris Accords that inspired the IMO rule, went along with this without a lot of fighting. According to the rule they had until 2020 to comply, and that was enough time to get ship manufacturers to construct them new vessels that wouldn't need the high-sulfur stuff. 

Half way through this transition period, in February 208, Macquarrie announced that there had been a drop in the amount of space contracted from its warehouses for the storage of the stuff being phased out. Its equity lost about two fifths of its value immediately.  

Macquarie had not disclosed to investors that such a regulation had been put in place, or that the shippers were ordering up ships from their manufacturers that wouldn't need the high-sulfur fuel. Canny investors could have found out on their own. The proceedings of the IMO are no secret, after all.    

And Moab Partners was not a collection of babes in the woods. 

Personally, I am not outraged by any of this. Perhaps it is the post-anarcho-cap in me taking over, but it seems a bit of a relief not to feel the necessity of ginning up some outrage for Moab.  



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