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Do you think big ETFs just buy shares willy nilly without any due diligence on company charters and bylaws?
by rosndo 5y ago
Do you think big ETFs just buy shares willy nilly without any due diligence on company charters and bylaws?
- roughly 5y agoI’m curious what happens in that case, then - let’s say hypothetically that SPY has enough cash come into the fund that they’ll cross that threshold if they follow their stated investment policy (“buy the S&P”) - what’s the move, then?
- lalaland1125 5y agoBuy futures or other assets that will mimic the price. The stated investment goal isn't "buy the S&P", it's "match the price of the S&P".
- roughly 5y agoHow far can you go with that strategy? The derivative assets aren’t going to fully move with the price, and can have much higher volatility than the asset you’re trying to avoid buying.
- rosndo 5y agoNo, you aren’t going to have higher volatility like this than you would buy triggering a poison pill like discussed in the article.
- rosndo 5y agoThey will talk to Twitter board and make an agreement with them to not trigger the poison pill, and continue buying shares. Such an agreement would be reached incredibly quickly, there would be no need for stopgap measures. From the article: > Under the new structure, if any person or group acquires beneficial ownership of at least 15% of Twitter’s outstanding common stock without the board’s approval
- thaumasiotes 5y agoIndex funds do, that's pretty much the definition of an index fund. ETFs are a different concept, but a good index fund will be structured as an ETF, and it looks like this thread is using "ETF" to mean "index fund"? If so, then the answer to your question is an unambiguous yes.
- rosndo 5y agoThis is simply incorrect. Index funds still do basic due diligence, they would not trigger this poison pill.
- quickthrowman 5y agoIf it’s a passively managed index fund, then yes, absolutely.
- rosndo 5y agoThat is not what passive management means. For example in the case of SPY, that would go against their stated investment objective. They also clearly state > the Trust may fail to own certain Index Securities at any particular time, the Trust generally will be substantially invested in Index Securities
- quickthrowman 5y agoAlright, then I suppose they’d buy up to 14.9% and then create additional long exposure thru swaps or synthetic longs using options.
- rosndo 5y agoOr they’d just hit up twitter’s board, enter an agreement with them, and continue buying shares as normal. The poison pill just requires prior approval from the board, which they would happily grant in this kind of a case.