MiniCase-MFGlobal-2011

MiniCase-MFGlobal-2011 - Mini Case of the Decline of MF...

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“Mini Case” of the Decline of MF Global Going for broke (literally)! 1
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History of MF Global 2
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But first … some background MF Global a brokerage firm (specializes in futures and options) Clients of MF Global accounted for 28% of future and option trades at Chicago Mercantile Exchange Makes trades on behalf of clients but also makes trades/bets with own money Trying to become a major investment bank 3
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Background on Jon Corzine First made his name at Goldman Sachs (traded US government bonds) Rose to be CEO & Chairman of Goldman Sachs Pushed for Goldman IPO Was replaced as CEO in 1999 by Henry Paulson Reportedly got $400M from IPO 4
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What’s the downfall? 8
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Why the downfall of MF Global? MF Global was a highly levered company Recently disclosed had $41B in assets but only $1.4B in equity (roughly a 30-1 leverage ratio!) This means an extremely high-risk and high-reward situation with little margin for error Based on experience in high-level politics 10
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