Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
UnionLeader.com – For sheer toe-curling embarrassment, it may be a while before Wall Street does better than the Bernard Madoff scandal. Here was a rogue who practically telegraphed his unreliability by hiring a tiny, no-name audit firm, by reporting monthly investment results that never fluctuated and by claiming a trading strategy that could not possibly have been implemented given the billions of dollars he managed.
And yet, despite these warnings, the rich, the famous and the supposedly sophisticated entrusted their money to Madoff, who defrauded them with the most laughably crude of methods — an old-fashioned Ponzi scam.
CNNMoney.com - Railroad CSX Corp. said Wednesday it has settled a case of alleged securities law violations with two activist shareholder hedge funds.
If the settlement is approved by a federal court, CSX will receive $10 million from TCI, which manages The Children’s Master Investment Fund, and $1 million from 3G Capital Management.
The case, brought by a CSX shareholder, accused the hedge funds of collecting "short-swing" profits, or using insider information to nab a short-term gain. But under the settlement, the hedge funds deny any wrongdoing.
CNNMoney.com – A shareholder has sued CSX Corp. (CSX) and two hedge funds over sales of CSX shares before the funds publicly disclosed plans to shake up the railroad operator’s board in a proxy fight earlier this year.
The lawsuit, filed in U.S. District Court in Manhattan on Tuesday, is seeking recovery of so-called "short-swing" profits related to sales by The Children’s Investment Fund Management LLP, or TCI; 3G Capital Partners LP and their principals between August and September 2007 on behalf of the company and its shareholders. CSX is a nominal defendant in the case.
The complaint alleges the funds or their principals purchased large numbers of shares and derivatives equivalent to CSX shares within six months of their prior share sales and at lower prices.
New York (HedgeCo.Net) – Jacksonville-based CSX Corp’s profit fell 6.1 percent in the third quarter according to their regulatory filing yesterday, thanks to reduced freight in a sour U.S. economy. This is the first time in the last five quarters that the railroad company has seen a decrease in profit.
Net income for the third quarter totaled $382 million, down $25 million from a year ago while revenue rose 18 percent to almost $3 billion.
While per-share earnings rose from 91 to 94 cents, it is because the company had reduced the amount of outstanding stock.
CEO Michael Ward maintains a positive outlook, saying CSX has strong liquidity and plenty of access to credit.
“CSX delivered impressive financial results in a challenging economy,” Ward said in a statement. “Our resilient business portfolio and disciplined operations continue to generate substantial earnings growth for shareholders.”
The company recently made headlines for its drawn out proxy battle with hedge funds TCI and 3G Capital Partners. After reluctantly placing two representatives from the funds on the Board of Directors, an appellate court denied their attempt to withhold two more seats in September. CSX was forced to concede, giving the activist hedge funds four seats total on the Board.
Despite the loss in profit, CSX increased their operating income by 31 percent to $733 million by moderating fuel costs and a “focus on productivity and cost control.” They are predicting that full-year earnings will come out at the “low end” of the estimated $3.65 to $3.75 a share.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
Florida Times Union – CSX Corp.’s proxy fight with two hedge funds apparently ended Monday, after an appellate court turned down CSX’s attempt to block some of the funds’ votes for the company’s board of directors.
CSX, which had already seated two representatives of The Children’s Investment Fund Management LLP and 3G Capital Partners Ltd. on its board, said Monday it will now add two additional TCI and 3G nominees.
All four TCI-3G nominees won election to CSX’s 12-member board of directors at the company’s shareholders meeting in June. But after the votes were counted, CSX said it would only seat two of them until its court case was resolved.
On Monday, a three-judge panel of the U.S. Court of Appeals for the Second Circuit ruled against CSX, upholding a June decision by U.S. District Judge Lewis Kaplan. CSX had filed a lawsuit saying that TCI and 3G violated federal disclosure laws about their stock ownership in CSX. Kaplan agreed that the funds violated those laws, but said that did not give him the authority to block their proxy votes.
Bizjournals.com- CSX Corp’s board is in for a bumpy ride despite assurances from the railroad and two rival hedge funds they will work together to maximize profitability, a railroad analyst said.
"Everyone is human and the proxy fight between them has gotten ugly at times," said Lee Klaskow, a Longbow Research senior analyst.
Four out of five of the nominees put forth by The Children’s Investment Fund Management LLP and 3G Capital Partners Ltd. have been voted in by shareholders, according to the independent inspector of the election’s preliminary report. As reported, the vote is a sound defeat for CSX CEO Michael Ward and his managment group, which fought hard to convince shareholders to avoid the candidiates backed by the hedge funds.
Klaskow said the board changes won’t change day-to-day operations, but they may affect long-term ones, as the hedge-fund-nominated members will likely make more aggressive proposals.
Bizjourmals.com- The country’s largest proxy advisory company recommended the election of four of the five board members nominated by hedge funds engaged in a proxy contest with CSX Corp.
The Children’s Investment Fund Management LLP and 3G Capital Partners Ltd. have nominated five new members for CSX’s 12-member board.
The RiskMetrics Group, a proxy advisory company, withheld recommending Gary Wilson. It also recommended rejecting CSX’s proposal that would allow shareholders to call special meetings except on topics voted on within the last year. Because CSX elects board members at its annual shareholder meeting, that would bar special meetings to recall board members. RiskMetrics said the proposal would further entrench the board and isolate shareholders.
Forbes- Shares of railroad operator CSX Corp. may trade actively Thursday after a federal judge’s ruling opened the doors to a proxy battle later this month.
On Wednesday afternoon, the judge ruled that dissident shareholders broke the law in their effort to change CSX’s corporate structure, but did not block them from voting for their nominees to the company’s board.
Jacksonville, Fla.-based CSX had sued the two hedge funds in March, accusing them of using share swap contracts to evade federal securities filing requirements.
Bizjournals.com- CSX Corp. and the activist hedge funds engaged in a proxy contest with the railroad will make their cases to gain the recommendation of a company many institutional investors rely on when casting shareholder votes.
RiskMetrics Group, a proxy advisory company, will hold a special governance forum at 11 a.m. June 9 in anticipation of CSX’s annual meeting June 25 in New Orleans. The forum, to be webcast, will involve representatives of CSX (NYSE: CSX) and hedge funds The Children’s Investment Fund Management LLP and 3G Capital Partners Ltd.
The hedge funds have teamed to nominate five people to CSX’s 12-member board and make several shareholder proposals.
Reuters- U.S. railroad CSX Corp, locked in a proxy battle with two hedge funds, urged shareholders in a letter on Tuesday to vote against the activist investor group’s proposed slate of five directors, saying they had "no plan" for the company.
"The TCI Group, which is promoting a slate of five new directors for the CSX board, has no plan and no new ideas for the company," wrote Michael Ward, chairman and chief executive of Jacksonville, Florida-based CSX. "They’ve made demands that we believe would damage CSX and impair the value of your investment — ideas such as saddling CSX with ‘junk’-rated debt or doing a leveraged buyout at $50 a share, with the stock price now in the high $60s."
New York Post- A looming decision in a heated lawsuit brought by railroad giant CSX Corp. could shut down a loophole used by activist hedge funds to hide their stake from the market.
CSX alleges that two big hedge funds – The Children’s Investment Fund (TCI) and 3G Capital Partners – used complex swap agreements with investment banks to secretly hide their 12 percent ownership stake in the rail operator.
TCI boss Christopher Hohn admitted in a bench trial Thursday to buying millions of dollars worth of swaps for CSX shares early last year.
Hohn, the son of working-class Jamaican parents who emigrated to London, disclosed his position in CSX last December and has launched a proxy contest to unseat five of the company’s directors.
Reuters- The chief executive of CSX Corp said in court on Wednesday he felt targeted by activist investors seeking to get seats on the board of directors, but the rail company negotiated with them in good faith to try to find common ground.
CSX sued The Children’s Investment Fund Management, a hedge fund known as TCI, and another fund, 3G Capital Partners, in March, contending they violated securities laws in their efforts to nominate a slate of directors for election at the company’s annual shareholder meeting.
The funds are trying to get five directors onto the 12-member CSX board.
