ISRAEL AT WAR - DAY 141

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Hamas may have profited from Oct. 7 assault with informed trading — study

Researchers find ‘significant’ spike in short-selling of Israeli stocks in period leading up to massacre, including ‘exceptional’ activity on October 2

The Tel Aviv Stock Exchange, December 25, 2018. (Adam Shuldman/Flash90)
File: The Tel Aviv Stock Exchange, December 25, 2018. (Adam Shuldman/Flash90)

A recent study found that the Hamas terror group may have tried to profit off its October 7 assault on Israel, using advance knowledge of the attack to short-sell Israeli companies in the days leading up to the massacre.

The study published Sunday in the SSRN journal by Robert J. Jackson, Jr. from the New York University School of Law and Joshua Mitts of Columbia Law School finds that traders who appear to have had advance knowledge made billions of dollars.

“We document a significant spike in short selling in the principal Israeli-company ETF days before the October 7 Hamas attack,” the paper said, concluding that their data was in line with the consequences of informed trading.

“The short selling that day far exceeded the short selling that occurred during numerous other periods of crisis, including the recession following the financial crisis, the 2014 Israel-Gaza war, and the COVID-19 pandemic. Similarly, we identify increases in short selling before the attack in dozens of Israeli companies traded in Tel Aviv,” it noted.

The paper added that it also found no significant increase in short selling before the Knesset passed its controversial law barring courts from using a test of reasonableness to strike down government decisions in July.

Short selling is when a trader borrows shares in a specific company and then sells them, hoping the price will fall after so they can buy them back for a lower price.

File: The area of ​​the Supernova festival where hundreds of Israelis were killed and kidnapped by Hamas terrorists in the October 7 terror onslaught, October 12, 2023. (Chaim Goldberg/Flash90)

Companies analyzed included major banks Hapoalim, Leumi, Discount, and Mizrahi-Tefahot, pharmaceutical firm Teva and software giant NICE.

“For one Israeli company alone [Bank Leumi], 4.43 million new shares sold short over the September 14 to October 5 period yielded profits (or avoided losses) of 3.2 billion NIS ($740 million) on that additional short selling,” the paper said.

“Although we see no aggregate increase in shorting of Israeli companies on US exchanges, we do identify a sharp and unusual increase, just before the attacks, in trading in risky short-dated options on these companies expiring just after the attacks,” it added.

Researchers said the peak of these types of transactions came on October 2, which was greater than 99 percent of the 3,570 trading days analyzed in the study, going back 15 years.

They also noticed that short selling on the eve of the attacks at the Tel Aviv Stock Exchange “increased dramatically.”

Israel has vowed to topple Hamas after the October 7 massacres, in which Palestinian terrorists stormed across the border from Gaza and slaughtered some 1,200 people, mostly civilians, and took around 240 hostages.

As the war in Gaza rages, Israel’s stock market has taken a hit, and the country’s economic growth forecast has been cut.

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