As stocks fell, Alberta oil man heard the awful words: margin call
Calgary oil executive Richard Gusella went public Monday with an embarrassment thousands of market players undoubtedly face: margin calls they can't meet.
Connacher three-month chart(CBC)Buying stock on margin means buying it partly with borrowed money. When share prices plummet, brokers ask margin customers to put up more collateral, such as cash. Those who fail to do so see their stock sold out from under them, often at a severe loss.
Gusella is president of Connacher Oil and Gas and chairman of Petrolifera Petroleum, both based in Calgary and listed on the Toronto Stock Exchange. Connacher's share price is down 64 per cent from its 52-week high; Petrolifera's is down 86 per cent.
The two companies issued nearly identical statements Monday saying Gusella has "involuntarily sold a significant percentage of his common shareholding" in each since early October "in order to meet margin loan calls."
Petrolifera three-month chart(CBC)Gusella told Connacher's board he is "very disappointed to have been required to sell any shares of Connacher involuntarily but the sales were obviously triggered by the unprecedented deterioration in capital markets triggered by the worldwide credit and ensuing financial crisis," the Connacher statement said.
"I have been a substantial individual shareholder of Connacher since joining the company in 2001 and have recently and consistently added to my shareholding position through the purchase of new issues, exercise of options and in the open market. My confidence in Connacher and its outlook remains undiminished and I anticipate adding to my holdings as circumstances permit in the future."
The Petrolifera statement used the same language, except to quote Gusella as saying he has been "a substantial individual shareholder of Petrolifera since the company was formed in 2004 and recently added to my shareholding position through a considerable dollar value purchase of additional shares from the company's last new issue in June 2008, at much higher prices than today."
The June issue was sold at $9 a share. Petrolifera closed Friday at $2.47, down from a 52-week high of $17.83. Connacher closed at $1.90, down from a 52-week high of $5.26.
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