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.
Barron – President Obama took credit Wednesday for the recovery in the financial markets while at the same time decrying Wall Street’s profits and the big bonuses that will be paid out as a result.
In his prime-time news conference, Obama said that if shaming those on Wall Street who take home multi-billion-dollar bonuses doesn’t work, he vowed to make sure shareholders of those companies were made aware of the compensation being doled out.
In the absence of "remorse" of Wall Streeters for raking in big paychecks once again, the president said financial regulatory reform would be necessary to prevent banks from taking risks that he said caused the financial crisis necessitating government bailouts.
New York Daily News – Marc Dreier will plead guilty to all charges stemming from the $700 million investment fraud he is accused of carrying out, his lawyer said Monday.
Defense lawyer Gerald Shargel said Dreier will enter the plea May 11 to securities fraud, wire fraud and money laundering charges. He wants to accept responsibility and show his remorse, Shargel said.
Until December, Dreier had led a law firm with 250 lawyers and celebrity clients, including Jay Leno and ex-New York Giants star Michael Strahan. He was arrested after hedge funds complained he was stealing from them.
Reuters – Merrill Lynch & Co Chief ExecutiveJohn Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, but the battered company’s compensation committee is resisting his request, the Wall Street Journal said, citing people familiar with the situation.
The compensation committee has not reached a decision, but is leaning toward denying Thain and other senior executives bonuses for this year, the people told the paper.
Merrill could not be immediately reached for comment.
Shareholders on Friday approved Bank of America Corp’s takeover of Merrill, a deal fraught with risk but one that would create a banking giant with a leading position in almost every major area of the financial system.
CNNMoney.com – New York hedge fund Elliott Associates LP lowered its offer price Tuesday for Epicor Software Corp., saying in a letter it was "extremely disappointed" Epicor’s board had recommended shareholders reject a takeover.
Elliott, a large shareholder in the Irvine, Calif., software company, told Epicor’s board that it will now offer $7.50 per share, which would value the company at $446.8 million based on the number of shares outstanding at Aug. 1. That’s down from Elliott’s previous offer of $9.50 per share, which valued Epicor at $565.9 million.
Elliott already owns 10.2 percent of the company’s shares.
Globe and Mail – Since many hedge fund managers like to drive Porsche roadsters, it’s somehow appropriate that the German auto maker just ran them down.
The European hedge fund community took a pounding Monday covering short positions in Volkswagen. Shares in the auto company doubled Monday on a short squeeze that came after Porsche announced it had used derivatives to build a 74 per cent stake in VW. That move brought a long-running takeover near the finish line, and also meant portfolio managers betting on a drop in Volkswagen shares had to cover positions.
In their rush to cover shorts, often at massive losses, hedge funds pushed up the value of Volkswagen by 123 per cent on Monday, briefly making the auto maker the largest company on earth. Shares subsequently slipped, but ended the day up 25 per cent.
Guardian.co.uk – Housebuilder Taylor Wimpey has slipped more than 8% on news that Toscafund, the hedge fund run by former bank analyst Martin Hughes, has sold a chunk of shares in the business.
Tosca, which is said to have lost about £300m in the collapse of US bank Washington Mutual, held a 10.2% stake in Taylor Wimpey. But in an official filing just out, Tosca has now reduced that to below the 3% disclosable threshold.
Taylor Wimpey is down 1.75p at 19p, but rival Redrow, where Tosca had a 27% stake, has climbed 6.75p to 163p. On Friday, Redrow said Bridgemere Securities had bought 14.4m shares to take its stake to 16.24%. Traders wondered whether some of these shares might have come from Tosca.
Bridgemere is a fund set up by the Redrow founder, Stephen Morgan, and the purchase has prompted talk of a possible takeover of Redrow.
Guardian.co.uk – MEPs will call tomorrow for EU legislation to force private equity groups and hedge funds to disclose unprecedented amounts of information about their activities.
The demand for tougher regulation comes as private equity groups are warning that the enduring credit crunch will reduce new money inflows into their funds by up to 30% over the next two years, and mirrors a call from the UK’s largest trade union, Unite, for hedge funds to be forced to demonstrate that their investment strategies are not perpetuating the current market turmoil.
The union, which has put forward an emergency motion to the Labour party conference on the Lloyds TSB takeover of HBOS, is demanding that hedge funds be more transparent, give greater disclosure and must be subject to risk management.
BBC UK News – "They hunt as a pack and can bring down financial systems" says the Daily Mirror, describing the hedge fund managers widely blamed for bringing down HBOS.
The decision to halt short selling of bank shares – for which hedge funds are widely blamed – earns the prime minister praise from the Independent, which says, "It is almost as if Mr Brown were Chancellor again".
But the Sun likens the ban to ringing alarm bells as the Titanic sinks.
‘Secret deal’
The Financial Times reports that news of Lloyds TSB’s takeover of HBOS left a "mood of melancholic resignation" in Scotland, where HBOS employs 17,000 people.
But the Daily Express says some MPs suspect a "secret deal" may have been done to protect Scottish jobs at the expense of employees in England.
Ahead of the Glenrothes by-election the government does not want to "alienate" Scottish voters, says the Times.
Independent – An unprecedented crackdown on speculators preying on falling share prices began on both sides of the Atlantic yesterday, as Gordon Brown promised to "clean up the financial system" after days of turmoil.
The Financial Services Authority (FSA) banned "short selling" of bank shares from midnight last night, after warnings that the practice helped fuel market turmoil that forced the dramatic £12.2bn takeover of HBOS by Lloyds TSB. This came as the New York Attorney announced his office had launched an investigation into illegal manipulation to profit from short selling. The move is to uncover whether speculators have spread misleading information or acted in concert to purposely drive down share prices.
Wealthy hedge fund traders, heavy users of the shorting strategy, have sparked fury after making millions from the collapse in value of UK banking stocks.
Reuters – Hedge fund Harbinger Capital Partners said on Thursday it is seeking approval from Cleveland Cliff’s shareholders to boost its ownership stake to as much as a third of the iron-ore company.
Harbinger — already Cleveland-Cliffs’ largest shareholder — opposes Cleveland Cliffs’ proposed takeover of Alpha Natural Resources, saying it believes the Alpha deal is not in the best interest of shareholders.
The fund said in a regulatory filing that it has asked Cliffs for a shareholder vote that would allow Harbinger to acquire shares that would bring its ownership up to more than one-fifth, but less than one-third, of Cliffs’ outstanding shares.
Reuters UK – Bombed-out valuations present an unprecedented buying opportunity in the European biotech sector, according to venture capital firm Index Ventures, which is eyeing both early and late-stage opportunities.
"It’s like being in a candy shop," partner Francesco De Rubertis told Reuters. "I’m very optimistic about the fact that a year from now, or a year and a half from now, the market will be very high."
He sees a major disconnect in current pricing for biotech assets, with Big Pharma companies regularly paying 50 to 100 percent takeover premiums for businesses that have been shunned by risk-averse investors.
Europe is a particularly fertile ground because of its relative immaturity.
Fort Worth Star Telegram- Citadel Investment Group is bullish on RadioShack, buying 6.9 million shares, or 5.3 percent of the electronics retail chain’s stock, according to a federal filing Monday.
With the purchase, the Chicago-based hedge fund becomes the fourth-largest holder of RadioShack stock — but the only one of the top seven that has been buying, not selling.
Why RadioShack, which is attempting a turnaround?
Citadel wouldn’t say. "We don’t comment on positions," spokeswoman Katie Spring said.
The filing with the Securities and Exchange Commission indicated that Citadel was not contemplating a takeover. Rather, reports described the purchase as a passive investment with no intent of influencing the company.
