In re HUDSON BAY CAPITAL

 
 
 
 UNITED STATES OF AMERICA 
 Before the 
 SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES EXCHANGE ACT OF 1934 
Release No. 70399 / September 16, 2013 
 
ADMINISTRATIVE PROCEEDING 
File No. 3-15478 
 
 
In the Matter of 
 
HUDSON BAY CAPITAL 
MANAGEMENT LP,  
 
Respondent. 
 
 
 
 
 
 
ORDER INSTITUTING CEASE-AND-
DESIST PROCEEDINGS PURSUANT TO 
SECTION 21C OF THE SECURITIES 
EXCHANGE ACT OF 1934, MAKING 
FINDINGS, AND IMPOSING A CEASE-
AND-DESIST ORDER AND CIVIL 
PENALTY 
  
I. 
 
 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-
and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 
Exchange Act of 1934 (“Exchange Act”), against Hudson Bay Capital Management LP. (“Hudson 
Bay” or “Respondent”).  
 
II. 
 
 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the findings  
herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
 proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-
and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 
Findings, and Imposing a Cease-and-Desist Order and Civil Penalty (“Order”), as set forth below.   
 
 
 
 

 2 
III. 
 
 On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that:  
 
Summary 
 
1. These proceedings arise out of violations of Rule 105 of Regulation M of the 
Exchange Act by Hudson Bay, a New York-based registered investment adviser.  Rule 105 
prohibits buying an equity security made available through a public offering, conducted on a firm 
commitment basis, from an underwriter or broker or dealer participating in the offering after 
having sold short the same security during the restricted period as defined therein. 
 
 2. On four occasions, from May 2009 through December 2012, Hudson Bay bought 
offered shares from an underwriter or broker or dealer participating in a follow-on public offering 
after having sold short the same security during the restricted period.  These violations collectively 
resulted in profits of $665,674.96.  
 
Respondent 
 
 3. Hudson Bay Capital Management LP is a Delaware limited partnership with its 
principal place of business in New York, New York.  Hudson Bay Capital Management has been 
registered with the Commission as an investment adviser since March 30, 2012 and provides 
advisory services to two funds, each organized in a master-feeder structure, with total assets 
under management in excess of $2.9 billion. 
 
Legal Framework 
 
4. Rule 105 makes it unlawful for a person to purchase equity securities from an 
underwriter, broker, or dealer participating in a public offering if that person sold short the 
security that is the subject of the offering during the restricted period defined in the rule, absent 
an exception.  17 C.F.R. § 242.105; see Short Selling in Connection with a Public Offering, Rel. 
No. 34-56206, 72 Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The Rule 105 
restricted period is the shorter of the period:  (1) beginning five business days before the pricing 
of the offered securities and ending with such pricing; or (2) beginning with the initial filing of a 
registration statement or notification on Exchange Act Form 1-A or Form 1-E and ending with 
pricing.   
 
5. “The goal of Rule 105 is to promote offering prices that are based upon open 
market prices determined by supply and demand rather than artificial forces.”  Final Rule: Short 
Sales, Exchange Act Release No. 50103.  Rule 105 is prophylactic and prohibits the conduct 
irrespective of the short seller’s intent in effecting the short sale. 
 
  
                                                 
1
 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 
person or entity in this or any other proceeding. 

 3 
Hudson Bay’s Violations of Rule 105 of Regulation M 
 
 6. On April 20, 2010, Hudson Bay sold short 444,500 shares of MGIC Investment 
Corp. (“MTG”) during the restricted period at a weighted average price of $11.1833 per share.  On 
April 21, 2010, MTG announced the pricing of a follow-on offering of its common stock at $10.75 
per share.  Hudson Bay received an allocation of 135,000 shares in that offering.  The difference 
between Hudson Bay’s proceeds from the restricted period short sales of MTG shares and the price 
paid for the 135,000 shares received in the offering was $58,495.50.  Thus, Hudson Bay’s 
participation in the MTG offering netted total profits of $58,495.50.  
 
 7.  On December 7, 2012, Hudson Bay sold short 9,904 shares of American 
International Group, Inc. (“AIG”) during the restricted period at a weighted average price of 
$34.07 per share.  On December 10, 2012, AIG announced the pricing of a follow-on offering of 
its common stock at $32.50 per share.  Hudson Bay received an allocation of 20,000 shares in that 
offering.  The difference between Hudson Bay’s proceeds from the restricted period short sales of 
AIG shares and the price paid for the 9,904 shares received in the offering was $15,549.28.  
Respondent also improperly obtained a benefit of $22,209.18 by purchasing the remaining 10,096 
shares at a discount from AIG’s market price. Thus, Hudson Bay’s participation in the AIG 
offering netted total profits of $37,758.46. 
 
 8. From September 17, 2010 through September 23, 2010, Hudson Bay sold short 
465,000 shares of Petroleo Brasileiro SA (“PBR”) during the restricted period at a weighted 
average price of $35.0667 per share.  On September 23, 2010, PBR announced the pricing of a 
follow-on offering of its common stock at $34.49 per share.  Hudson Bay received an allocation of 
150,000 shares in that offering.  The difference between Hudson Bay’s proceeds from the 
restricted period short sales of PBR shares and the price paid for the 150,000 shares received in the 
offering was $85,505.00.  Thus, Hudson Bay’s participation in the PBR offering netted total profits 
of $85,505.00. 
 
 9. On May 6, 2009, Hudson Bay sold short 2,000 shares of Wells Fargo Co. (“WFC”) 
during the restricted period at a weighted average price of $24.69 per share.  On May 8, 2009, 
WFC announced the pricing of a follow-on offering of its common stock at $22.00 per share.  
Hudson Bay received an allocation of 150,000 shares in that offering.  The difference between 
Hudson Bay’s proceeds from the restricted period short sales of WFC shares and the price paid for 
the 2,000 shares received in the offering was $5,380.00.  Respondent also improperly obtained a 
benefit of $478,536.00 by purchasing the remaining 148,000 shares at a discount from WFC’s 
market price. Thus, Hudson Bay’s participation in the WFC offering netted total profits of 
$483,916.00. 
 
 
  10. In total, Hudson Bay’s violations of Rule 105 resulted in profits of $665,674.96. 
 
 
 
 

 4 
Violations 
 
 11. As a result of the conduct described above, Hudson Bay violated Rule 105 of 
Regulation M under the Exchange Act.  
 
Hudson Bay’s Remedial Efforts 
12. In determining to accept the Offer, the Commission considered remedial 
acts promptly undertaken by Respondent and cooperation afforded to Commission staff. 
IV. 
 
 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent Hudson Bay’s Offer. 
 
 Accordingly, it is hereby ORDERED that: 
 
 A. Pursuant to Section 21C of the Exchange Act, Respondent Hudson Bay cease and 
desist from committing or causing any violations and any future violations of Rule 105 of 
Regulation M of the Exchange Act;   
 
 B. Hudson Bay shall within fourteen (14) days of the entry of this Order, pay 
disgorgement of $665,674.96, prejudgment interest of $11,661.31 and a civil money penalty in the 
amount of $272,118 (for a total of $949,454.27) to the United States Treasury.  If timely payment 
is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 U.S.C. § 
3717.  Payments must be made in one of the following ways: 
 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request;
2
 
(2) Respondent may make direct payment from a bank account via Pay.gov through the 
SEC website at http://www.sec.gov/about/offices/ofm.htm; or  
(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 
money order, made payable to the Securities and Exchange Commission and hand-
delivered or mailed to: 
 
Enterprise Services Center 
Accounts Receivable Branch 
HQ Bldg., Room 181, AMZ-341 
6500 South MacArthur Boulevard 
Oklahoma City, OK  73169 
 
 Payments  by  check  or  money  order  must  be  accompanied  by a  cover  letter  identifying 
Hudson  Bay as  a  Respondent  in  these  proceedings,  and  the  file  number  of  these  proceedings;  a 
                                                 
2
  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 
threshold, respondents must make payments pursuant to options (2) or (3) above. 

 5 
copy of the cover letter and check or money order must be sent to Gerald W. Hodgkins, Associate 
Director,  Division  of  Enforcement,  Securities  and  Exchange  Commission, 100  F  Street,  N.E., 
Washington, DC  20549.  
 
 By the Commission. 
 
 
 
       Elizabeth M. Murphy 
       Secretary 

UNITED STATES OF AMERICA 

 Before the 

 SECURITIES AND EXCHANGE COMMISSION 

 

SECURITIES EXCHANGE ACT OF 1934 

Release No. 70399 / September 16, 2013 

 

ADMINISTRATIVE PROCEEDING 

File No. 3-15478 

 

 

In the Matter of 

 

HUDSON BAY CAPITAL 

MANAGEMENT LP,  

 

Respondent. 

 

 

 

 

 

 

ORDER INSTITUTING CEASE-AND-

DESIST PROCEEDINGS PURSUANT TO 

SECTION 21C OF THE SECURITIES 

EXCHANGE ACT OF 1934, MAKING 

FINDINGS, AND IMPOSING A CEASE-

AND-DESIST ORDER AND CIVIL 

PENALTY 

  

I. 
 

 The Securities and Exchange Commission (“Commission”) deems it appropriate that cease-

and-desist proceedings be, and hereby are, instituted pursuant to Section 21C of the Securities 

Exchange Act of 1934 (“Exchange Act”), against Hudson Bay Capital Management LP. (“Hudson 

Bay” or “Respondent”).  

 

II. 
 

 In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept.  Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the findings  

herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

 proceedings, which are admitted, Respondent consents to the entry of this Order Instituting Cease-

and-Desist Proceedings Pursuant to Section 21C of the Securities Exchange Act of 1934, Making 

Findings, and Imposing a Cease-and-Desist Order and Civil Penalty (“Order”), as set forth below.   

 

 

 

 



 2 

III. 
 

 On the basis of this Order and Respondent’s Offer, the Commission finds1 that:  

 

Summary 

 

1. These proceedings arise out of violations of Rule 105 of Regulation M of the 

Exchange Act by Hudson Bay, a New York-based registered investment adviser.  Rule 105 

prohibits buying an equity security made available through a public offering, conducted on a firm 

commitment basis, from an underwriter or broker or dealer participating in the offering after 

having sold short the same security during the restricted period as defined therein. 

 

 2. On four occasions, from May 2009 through December 2012, Hudson Bay bought 

offered shares from an underwriter or broker or dealer participating in a follow-on public offering 

after having sold short the same security during the restricted period.  These violations collectively 

resulted in profits of $665,674.96.  

 

Respondent 

 

 3. Hudson Bay Capital Management LP is a Delaware limited partnership with its 

principal place of business in New York, New York.  Hudson Bay Capital Management has been 

registered with the Commission as an investment adviser since March 30, 2012 and provides 

advisory services to two funds, each organized in a master-feeder structure, with total assets 

under management in excess of $2.9 billion. 

 

Legal Framework 

 

4. Rule 105 makes it unlawful for a person to purchase equity securities from an 

underwriter, broker, or dealer participating in a public offering if that person sold short the 

security that is the subject of the offering during the restricted period defined in the rule, absent 

an exception.  17 C.F.R. § 242.105; see Short Selling in Connection with a Public Offering, Rel. 

No. 34-56206, 72 Fed. Reg. 45094 (Aug. 10, 2007) (effective Oct. 9, 2007).  The Rule 105 

restricted period is the shorter of the period:  (1) beginning five business days before the pricing 

of the offered securities and ending with such pricing; or (2) beginning with the initial filing of a 

registration statement or notification on Exchange Act Form 1-A or Form 1-E and ending with 

pricing.   

 

5. “The goal of Rule 105 is to promote offering prices that are based upon open 

market prices determined by supply and demand rather than artificial forces.”  Final Rule: Short 

Sales, Exchange Act Release No. 50103.  Rule 105 is prophylactic and prohibits the conduct 

irrespective of the short seller’s intent in effecting the short sale. 

 

  

                                                 
1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on any other 

person or entity in this or any other proceeding. 



 3 

Hudson Bay’s Violations of Rule 105 of Regulation M 

 

 6. On April 20, 2010, Hudson Bay sold short 444,500 shares of MGIC Investment 

Corp. (“MTG”) during the restricted period at a weighted average price of $11.1833 per share.  On 

April 21, 2010, MTG announced the pricing of a follow-on offering of its common stock at $10.75 

per share.  Hudson Bay received an allocation of 135,000 shares in that offering.  The difference 

between Hudson Bay’s proceeds from the restricted period short sales of MTG shares and the price 

paid for the 135,000 shares received in the offering was $58,495.50.  Thus, Hudson Bay’s 

participation in the MTG offering netted total profits of $58,495.50.  

 

 7.  On December 7, 2012, Hudson Bay sold short 9,904 shares of American 

International Group, Inc. (“AIG”) during the restricted period at a weighted average price of 

$34.07 per share.  On December 10, 2012, AIG announced the pricing of a follow-on offering of 

its common stock at $32.50 per share.  Hudson Bay received an allocation of 20,000 shares in that 

offering.  The difference between Hudson Bay’s proceeds from the restricted period short sales of 

AIG shares and the price paid for the 9,904 shares received in the offering was $15,549.28.  

Respondent also improperly obtained a benefit of $22,209.18 by purchasing the remaining 10,096 

shares at a discount from AIG’s market price. Thus, Hudson Bay’s participation in the AIG 

offering netted total profits of $37,758.46. 

 

 8. From September 17, 2010 through September 23, 2010, Hudson Bay sold short 

465,000 shares of Petroleo Brasileiro SA (“PBR”) during the restricted period at a weighted 

average price of $35.0667 per share.  On September 23, 2010, PBR announced the pricing of a 

follow-on offering of its common stock at $34.49 per share.  Hudson Bay received an allocation of 

150,000 shares in that offering.  The difference between Hudson Bay’s proceeds from the 

restricted period short sales of PBR shares and the price paid for the 150,000 shares received in the 

offering was $85,505.00.  Thus, Hudson Bay’s participation in the PBR offering netted total profits 

of $85,505.00. 

 

 9. On May 6, 2009, Hudson Bay sold short 2,000 shares of Wells Fargo Co. (“WFC”) 

during the restricted period at a weighted average price of $24.69 per share.  On May 8, 2009, 

WFC announced the pricing of a follow-on offering of its common stock at $22.00 per share.  

Hudson Bay received an allocation of 150,000 shares in that offering.  The difference between 

Hudson Bay’s proceeds from the restricted period short sales of WFC shares and the price paid for 

the 2,000 shares received in the offering was $5,380.00.  Respondent also improperly obtained a 

benefit of $478,536.00 by purchasing the remaining 148,000 shares at a discount from WFC’s 

market price. Thus, Hudson Bay’s participation in the WFC offering netted total profits of 

$483,916.00. 

 

 

  10. In total, Hudson Bay’s violations of Rule 105 resulted in profits of $665,674.96. 

 

 

 

 



 4 

Violations 

 

 11. As a result of the conduct described above, Hudson Bay violated Rule 105 of 

Regulation M under the Exchange Act.  

 

Hudson Bay’s Remedial Efforts 

12. In determining to accept the Offer, the Commission considered remedial 

acts promptly undertaken by Respondent and cooperation afforded to Commission staff. 

IV. 

 

 In view of the foregoing, the Commission deems it appropriate to impose the sanctions 

agreed to in Respondent Hudson Bay’s Offer. 

 

 Accordingly, it is hereby ORDERED that: 

 

 A. Pursuant to Section 21C of the Exchange Act, Respondent Hudson Bay cease and 

desist from committing or causing any violations and any future violations of Rule 105 of 

Regulation M of the Exchange Act;   

 

 B. Hudson Bay shall within fourteen (14) days of the entry of this Order, pay 

disgorgement of $665,674.96, prejudgment interest of $11,661.31 and a civil money penalty in the 

amount of $272,118 (for a total of $949,454.27) to the United States Treasury.  If timely payment 

is not made, additional interest shall accrue pursuant to SEC Rule of Practice 600 and 31 U.S.C. § 
3717.  Payments must be made in one of the following ways: 

 

(1) Respondent may transmit payment electronically to the Commission, which will 

provide detailed ACH transfer/Fedwire instructions upon request;2 

(2) Respondent may make direct payment from a bank account via Pay.gov through the 

SEC website at http://www.sec.gov/about/offices/ofm.htm; or  

(3) Respondent may pay by certified check, bank cashier’s check, or United States postal 

money order, made payable to the Securities and Exchange Commission and hand-

delivered or mailed to: 

 

Enterprise Services Center 

Accounts Receivable Branch 

HQ Bldg., Room 181, AMZ-341 

6500 South MacArthur Boulevard 

Oklahoma City, OK  73169 

 

 Payments by check or money order must be accompanied by a cover letter identifying 

Hudson Bay as a Respondent in these proceedings, and the file number of these proceedings; a 

                                                 
2  The minimum threshold for transmission of payment electronically is $1,000,000.  For amounts below the 

threshold, respondents must make payments pursuant to options (2) or (3) above. 



 5 

copy of the cover letter and check or money order must be sent to Gerald W. Hodgkins, Associate 

Director, Division of Enforcement, Securities and Exchange Commission, 100 F Street, N.E., 

Washington, DC  20549.  

 

 By the Commission. 

 

 

 

       Elizabeth M. Murphy 

       Secretary