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Saint-Gobain“s shares fall

Shares of Compagnie de Saint-Gobain SA fell sharply on confusion over whether or not the building-materials group had issued a EUR 800 million convertible bond. Rumors that the French company was set …

Shares of Compagnie de Saint-Gobain SA fell sharply on confusion over whether or not the building-materials group had issued a EUR 800 million convertible bond. Rumors that the French company was set to issue a convertible bond appeared confirmed by a wire-service report detailing the bond“s terms. But Saint-Gobain denied the report, saying it had no concrete plans for convertible bonds. The company“s shares fell 5.3% to EUR 162 as hedge funds shorted, or borrowed and then sold, the stock in expectation of a bond. These funds short an issue“s underlying equity to hedge against movement in the stock. The stock ultimately fell 3.4%, or EUR 5.70, to close at EUR 164. Fund managers said rumors of an imminent Saint-Gobain issue were widespread. Some investors had even received unofficial term sheets, in which market participants pass on the terms they have heard the bond will be issued on, but none reported seeing official notification from the lead managers.

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