Who Was Betting that Tokyo Electric Was Too Big To Fail?

Given the extensive damage created in the area surrounding the Fukushima nuclear power plant, it's clear that the costs to Tokyo Electric Power Company would very likely bankrupt the company, unless the government stepped in to protect the firm.

NYT reports:

Japanese regulators and executives of the Tokyo Electric Power Company are asking questions about a seemingly coordinated series of stock purchases two weeks ago that led to an undisclosed buyer or buyers acquiring a large block of the utility, which owns Japan’s dangerously damaged nuclear power plant.

Regulators want to know whether the trades, valued at up to $600 million and placed from Hong Kong during the week of April 3, were structured to circumvent Japanese securities laws, which require the owner of more than 5 percent of a publicly traded company to file disclosure papers identifying the shareholder.

Depending on the prices at which the buy orders were executed, they could add up to nearly 10 percent of Tepco’s shares...

 The trades were made during a period when the nuclear accident seemed to be threatening the company with financial disaster. Panicked investors were dumping Tepco’s shares, with as many as a fifth of the shares changing hands each day, at prices as low as 292 yen ($3.51) apiece Before the earthquake, shares of Tepco traded steadily at 2,100 yen ($25.25).

Was this speculation by a hedge fund operator that Japan would deem TEPCO too big to fail, or was it an inside job by Japanese operators who understood government thinking on the degree to which TEPCO would be protected?

Of course, knowing how government's operate these days, you don't need inside information to understand that the elite will be protected. Those elite certainly included TEPCO bondholders, right around the same time as the big plunger jumped in to but TEPCO common stock, I wrote in the EPJ Daily Alert:

For those of you that are real global adventurers, I'm talking real adventurers, it may make sense to take a look at debt of the Tokyo Electric Power Company. TEPCO is the owner of the Fukushima Daiichii nuclear plant that is crashing. Whenever a new batch of negative news comes out, TEPCO stock and bonds head south.

There is now speculation that TEPCO's liability will be capped at somewhere between $25 billion and $45 billion. If that occurs, TEPCO stock might even be a good buy if it gets low enough. But the bonds for sure will be protected. Those bonds are owned largely by powerful Japanese financial institutions, in combination with the global financial elite. The Japanese government will see to it that they are protected. So if you like to roll the dice, wait for a new batch of negative news out of Fukushima and buy the bonds on severe dips.