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Bloomberg - It has been a year of record misery: the largest bankruptcy, bank failure and Ponzi scheme in U.S. history; $720 billion in writedowns and losses by financial institutions; $30.1 trillion in market valuation wiped out.
The biggest loss and the hardest thing to recover, though, may be something that can’t be precisely measured — confidence in the markets and the firms that rely on them.
“The wholesale funding model lost its credibility,” said David Hendler, senior analyst at New York-based CreditSights Inc. “That started the semi-nationalization of funding in the financial markets. It’s a real chink in the armor of capitalism as supposedly the best process for allocating capital. The government is now deciding who gets access to capital.”
Reuters - Citigroup Inc lost more than one-quarter of its market value on growing worries over whether it has enough capital to withstand billions of dollars of potential losses and despite new support from its largest individual investor.
The second-largest U.S. bank by assets is looking at options now, including a sale of parts of the company or a merger with another firm, after its stock fell 50 percent this week, a person familiar with the matter said on Thursday.
Discussions so far have been internal, and some options –such as entering into a merger where other executives end up running the company — are unpalatable to managers at Citigroup, the person said. The bank’s board of directors is set to meet on Friday, and Morgan Stanley is not
New York (HedgeCo.Net) - Two hedge funds are looking to oust William Dillard II, CEO of Dillard’s Inc., after poor performance and lagging stock prices.
Barington Capital Group LP and Clinton Group Inc sent a letter to the SEC that was released yesterday, which asked the company to start to an immediate search for a new CEO.
"In our opinion, a management team with a comparable record of poor performance at any other company would have been fired long ago," the hedge funds said in the letter.
In addition to sales declining over the course of the year, Moody’s Investors Service warned last week that it may cut Dillard’s credit ratings to junk status.
The hedge funds are also looking to replace some of the other family members who work for the company, saying they are "overpaid and under-qualified for the positions they hold and can be readily replaced with more talented retailers."
The hedge funds claim that William Dillard II makes far more than other CEOs at similar companies. According to a report they cite from advisory firm Proxy Governance, William makes 54 percent above the average, while other executives at Dillard’s make 185 percent above the median.
Dillard’s, in an attempt to avoid a proxy battle with the aggressive hedge funds, agreed to place four candidates from the fund onto the Board of Directors in April.
The hedge funds own almost 6 percent of Dillard’s class A stock. Dillard’s stock is divided into two shares, a move that William made almost four decades ago to guard against takeovers.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) - Hedge fund manager Rosseau Asset Management Ltd. and certain related parties have filed a dissident’s proxy circular (the "Dissident’s Circular") to Noront Resources Ltd., in which the hedge fund group controls over approximately 9.2% of common shares.
Rosseau asks Noront’s shareholders to vote against the re-election of the Company’s current Board of Directors and instead vote to elect a new slate of directors at the upcoming annual meeting of shareholders scheduled to be held on October 28, 2008.
During recent meetings between Rosseau and Noront’s management, the hedge fund manager indicated it wanted significant changes to Noront’s Board of Directors and some senior management.
Rosseau rejected Noront’s compromise proposal and has commenced its proxy fight with the filing of the Dissident’s Circular, saying, "Rosseau’s action is not in the best interest of shareholders. It is an opportunistic attempt, in light of extraordinary recent market conditions……Norent will respond (to the circular) shortly."
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Chicago Tribune - The leader of an activist hedge fund with a significant stake in Sara Lee Corp. has been added to the foodmaker’s board of directors.
Downers Grove-based Sara Lee said Thursday that it is expanding its 10-member board by one, naming Jeffrey Ubben, founder and chief executive of ValueAct Capital, to the new spot. Last winter, San Francisco-based ValueAct bought a 5 percent stake in Sara Lee, maker of bread, hot dogs and meat products sold under such brands as Hillshire Farms and Jimmy Dean.
Activist investors often buy into what they perceive as undervalued companies and then urge significant changes. But ValueAct is considered less strident than some other activist funds, saying at the time of its purchase that it had no plans to push for strategic change at Sara Lee and was comfortable with the firm’s direction.
Neither Sara Lee, which is in the midst of a multiyear turnaround effort, nor ValueAct could be reached.
CNBC - Cramer got a chance Thursday to check in briefly with CSX Chairman and CEO Michael Ward.
Ward’s been a regular guest on Mad Money as his company has battled with activist hedge funds fighting to have him ousted.
Those hedge funds have managed to get two people on CSX’s board of directors, and another two are pending approval based on a lawsuit that proceeds to oral hearings this coming Monday, Aug. 25 in the Second Court of Appeals in New York.
“Maybe they can actually help,” Cramer said of the board additions.
Tampa Tribune - Yahoo is recounting the shareholder vote for its board of directors after discovering that a tabulating firm failed to register the opposition of a major investor.
The revision won’t change the outcome of Friday’s election, which retained Yahoo’s incumbent directors despite shareholder anger about the board’s handling of a now-withdrawn $47.5 billion takeover bid from Microsoft Corp.
However, the change will add a little more punch to the protest against the Yahoo board. The directors re-elected last week had been supported by at least 78 percent of the votes cast, based on the original results.
"It’s important for Yahoo’s board to understand there is still pressure on them," said Eric Jackson, a hedge fund manager who represents a group of stockholders with about 3.2 million Yahoo shares. "I thought Yahoo’s board was kind of let off the hook last week when they didn’t really deserve to be."
Capital Research Global Investors, which owns a 6.2 percent stake in Yahoo, lodged the inquiry Monday that resulted in the election recount. Convinced that its opposition to Yahoo’s board wasn’t reflected in last week’s vote, Capital Research demanded an audit from Broadridge Financial Solutions, the processing firm responsible for casting its ballot.
West Palm Beach (HedgeCo.Net) - Baader Wertpapierhandelsbank AG has been granted membership to the Compensation Fund of German Banks (EdB) by the German Financial Supervisory Authority (BaFin).
Once the entry into the commercial register has been completed, the institution will be known under its corporate name, Baader Bank AG.
"Receiving the full banking licence is a significant sign of the faith that is placed in the capability of our bank’, commented Uto Baader, Chairman of the Baader Board of Directors.
The bank operates as an all-round service provider for asset managers and other institutional customers as well as an arranger of financial innovations. The main products and services provided by the bank include certificates, publicly offered funds, single hedge funds and funds of hedge funds as well as managed accounts.
Baader Service Bank currently has 26 employees and reported net profit of EUR 0.56 million ($1 million) with total assets of EUR 53.3 million ($83.2 million) in 2007.
Miami Herald- Database provider InfoGROUP Inc. said Tuesday it has removed founder Vin Gupta as chairman, citing excessive corporate expenditures and expense reimbursements.
The changes are the result of an internal investigation, which came in response to an ongoing Securities and Exchange Commission investigation and a shareholder lawsuit. Gupta will continue to serve as chief executive officer of the company, which used to be named InfoUSA.
The company also said Gupta has "orally agreed" with the Board of Directors’ Special Litigation Committee to pay InfoGROUP $9 million. According to a news release, the payment is subject to a settlement agreement and court approval, but it’s not clear if it is referring to settlement of the shareholders lawsuit.
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.