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.
eBrandz – In a move expected to fuel speculation over Yahoo Inc.’s search for a new chief executive — Corporate raider and billionaire investor Carl Icahn augmented his stake in Yahoo, has bought up close to 7 million additional shares of the Internet Company over three days this week, paying around $67 million, according to regulatory filings.
Icahn, a billionaire hedge-fund manager who now holds a seat on Yahoo’s board, acquired 6.77 million additional shares of Yahoo stock during November 24-26 for 67 million dollars, now owns 75.6 million of the company’s shares, or a 5.4 percent stake valued at around $870 million based on Yahoo’s closing share price on Friday, according to the documents filed with the Securities and Exchange Commission and dated Wednesday.
The company’s stock moved up 93 cents, or nearly 9%, to $11.51 in the shortened trading session after Icahn, a Yahoo board member who has been pushing a strategy shift or a sale to Microsoft Corp., said he had bought about 6.8 million shares.
New York (HedgeCo.Net) – The hedge fund formerly run by the late Michael Klein has been sued by two individuals who owned a mortgage lending business in which the fund had a stake.
John and Kitty Gaiser are suing California-based Pacificor after the fund allegedly “misused a position of trust and control in order to attempt to take control of and acquire – without compensation – John and Kitty Gaiser’s ownership of Quality Home Loans,” according to a statement made by the Gaiser’s legal team. According to the Gaisers, Quality Home Loans filed for Chapter 11 bankruptcy protection, at which time the hedge fund acquired the business.
“It is our hope that this lawsuit will rectify the massive damage done to the Gaisers by the named defendants,” said their lawyer John Edgar. “We will look forward to proving these damages at trial.”
Pacificor is finding themselves in the middle of several lawsuits ever since Klein and his daughter were killed in plane crash last December over a Panama forest. The Sorenson Trust and Relief Return International, who had $24 million tied up in the hedge fund, is suing over a promise that Klein allegedly made before his death.
According to the company, Klein made a verbal promise to the company, saying they could still withdraw their investment if given notice by December 31, 2007. When they moved to withdraw $14 million from the fund and redeem $10 million in stock on December 27th, they were denied by Pacificor after the fund stated they had no knowledge of the promise made by Klein.
In addition to the suit, Klein’s estate is also being sued by his ex-wife over their daughter’s death and by the family of the daughter’s friend, who was the only survivor of the crash.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
West Palm Beach (HedgeCo.net) – Alternative investment management firm and Hedge Fund Launch of the Year Award Winner, AdultVest, Inc., announced it officially closed its offering in the Priapus Investment Fund, LLC.
"In spite of the US and Global economic condition, the Priapus Investment Fund, LLC is on track for a great year," Francis Koenig, the Manager of the Priapus Fund said, saying also that he has plans to re-open a new offering soon.
This year the Priapus Investment Fund acquired iPorn. com, HandJob. com, and several adult content libraries. The fund has invested in the development and acquisition of several internet technologies, software platforms, and mobile technologies, and also acquired a stake in a public company operating gentlemen’s clubs.
"We have identified a few more opportunities that will close out the year and expect the fund to be fully invested by early 2009," Koenig said, 2We are already hard at work on the development of Priapus Investment Fund II and have very high expectations for the new fund."
The Beverly Hills, California-based investment company deals exclusively in the estimated 100 billion dollar Adult Entertainment Industry. It is active in mergers, acquisitions, and operates the only on-line investment community with over 4,500 registered investors and over 1,000 adult entertainment companies seeking investments, mergers, and acquisitions.
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Chicago Tribune – The credit crunch and global economic recession have squeezed many independent filmmakers, who were already struggling from a glut of films and a shortage of funds even before the global economy went into a tailspin last month.
While the major studios have long-term deals in place to co-finance their movies, independent producers aren’t nearly as fortunate. Most of them do not have easy access to capital and instead must cobble together a patchwork of financing to make one film at a time. That patchwork has become frayed as lenders cool on making loans to filmmakers and foreign buyers grapple with access to credit and depressed currencies.
"The entire ability of independent filmmakers to finance their films has been shaken dramatically," said Mark Damon, chief executive of Foresight Unlimited, a Los Angeles film production company, who produced the 2003 drama "Monster."
Economic Times – A former Intel Corp engineer has been charged with stealing trade secrets worth $1 billion from the chip maker while he worked for Advanced Micro Devices Inc.
Federal prosecutors in Massachusetts alleged this week in a five-count indictment that Biswamohan Pani, 33, illegally downloaded more than a dozen confidential documents from Intel’s computer system in California during a four-day stretch in June. He had already resigned from Santa Clara, California-based Intel, but remained on the payroll and still had access to the company’s computers while he burned unused vacation days.
What Pani’s supervisors didn’t know then is that instead of taking the time to investigate a hedge fund job Pani claimed he was considering, he had actually started working for AMD and for a brief period was on both companies’ payrolls.
Reuters – A largely unnoticed ratings downgrade on a slate of Paramount Pictures movies backed by hedge-fund money offers rare proof that such innovative packages have proved to be wobbly investments.
The Melrose I fund, established in 2004, was cut six grades by Moody’s Investor Service from an investment grade "Baa2" to the speculative "B3" rating. The downgrade, announced October 21, could trigger higher interest payments to lenders, and will surely lower the value of debtholders’ bonds.
The fund is backed by a partial ownership stake in 26 Paramount films released during 2004-05. So, lead underwriter Merrill Lynch and other senior debtholders will maintain a minority hold on those assets until they can secure full repayment on their loans or Paramount buys out their equity positions.
Melrose I was crafted during the regime of Paramount chief Sherry Lansing, whose reign atop the Viacom Inc-owned studio ended in 2004 amid a lengthy commercial dry spell. That year, the studio released such iffy features as "The Stepford Wives," "Sky Captain and the World of Tomorrow" and "Alfie," though Paramount has never acknowledged publicly which of its pictures were funded by Melrose I.
Tehran Times – "We do have to have much more government oversight and involvement than we’ve seen in the last decade or so,” said Waxman, a California Democrat.
“A lot of people didn’t either know what they were getting into or much care because they weren’t going to be the ones holding the bag,” Waxman said in an interview on Bloomberg Television’s "Political Capital with Al Hunt,” airing.
Hedge funds need regulation "to make sure the incentives are right for them and others to do the right thing,” said Waxman. "Certainly we need more transparency.”
His House Oversight and Government Reform Committee will take testimony next month from representatives of hedge funds and from Freddie Mac and Fannie Mae, the biggest buyers of U.S. mortgages.
Los Angeles Times – Traders and investment bankers might have more to worry about than dwindling bonus pools this year as mass firings on Wall Street are set to hit a record.
The fallout from this year’s global credit crisis has claimed jobs throughout Wall Street, from hedge fund managers to floor traders and beyond. More than 110,000 people have lost their jobs so far this year, and some industry experts forecast it could come close to 200,000 before the year is over.
Even the financial industry’s biggest name isn’t immune. Goldman Sachs Group Inc., the world’s biggest investment bank, made plans Thursday to cut 3,200 positions from its staff of 32,000. Barclays Capital is in the midst of purging 3,000 jobs as part of its takeover of Lehman Bros., and Bank of America Corp.’s acquisition of Merrill Lynch & Co. is sure to add thousands more.
First Post – There’s no doubt which was the most popular reading material in the blogosphere this weekend – the extraordinary ‘farewell letter’ from Andrew Lahde, one of the most successful hedge fund manager in the world, who has said goodbye – and good riddance – to his old life in spectacular fashion.
Lahde became famous a year ago when his Santa Monica-based fund, Lahde Capital, returned a staggering 1000 per cent plus during 2007. The fund made its profit by shorting US suprime mortgages, which Lahde correctly predicted were a ticking time-bomb.
He was doing well this year, too, claiming a return of 400 per cent plus until he suddenly announced last month that he was bowing out. Then, on Friday, he decided to write an open letter to his former investors.
New York (HedgeCo.Net) – The Securities and Exchange Commission charged San Francisco-based MedCap Management & Research LLC and its principal Charles Frederick Toney, Jr. with defrauding investors via “portfolio pumping.”
“Fund investors relied on MMR and Toney to abide by their fiduciary duties and put the fund’s interests ahead of their own,” said San Francisco Regional Director of the SEC Marc J. Fagel in a press release yesterday. “Instead, Toney engaged in trading activity which hid his poor performance.”
Engaging in “portfolio pumping” in this case meant that Toney invested heavily at the quarter’s end with a thinly-traded penny stock, which in turn quadrupled the stock price and allowed him to inflate his quarterly results to investors. By doing this, the fund was able to hide what would have been a 40 percent quarterly loss for MedCap.
Instead, the scheme helped the company up its reported value by $29 million thanks to Toney’s four day buying frenzy which pushed the price of the stock from $.85 to $3.72. The fund was then able to charge higher management and performance fees that were based on the inflated numbers.
While MMR did not confirm or deny the allegations, the company has agreed to settle out of court by paying $100,000 in penalties and giving back the amount received in inflated management fees totaling over $70,000. Toney has also agreed not to act as an investment advisor for the next year.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
One of the pleasures of flying out of Newark — and there are so many — is the epic view of Manhattan, that soaring bulwark of affluence and might just off the coast of America.
But on Friday, when we pulled out for points west just after sunrise, I imagined all the brick-and-mortar ambition sinking into the rivers that encircle it. No need to ask why so glum, not with everybody watching their 401(k)’s pirouette down a black hole. Each passing day has brought new nightmares on Wall Street and more shared misery.
Still, by the end of the day, I was sitting on a hotel patio in Los Angeles, staring up the hill at that Hollywood sign and chatting with a smart young woman who markets movies. When the subject of the tumbling economy finally came up, she said that she had indeed been cutting back — by ordering drip coffee instead of a latte.
I waited a bit for the woman to crack a smile, to hammer me for being so credulous, but then I realized she was serious.
West Palm Beach (HedgeCo.net) – Noci Pictures Entertainment a Chicago and Los Angeles film production and structured finance company thinks it may have the answer and its own opportunity with its $100 million dollar international tax advantaged structured film deal that has an option to be principally protected as well using CPPI, including a stand alone 100% principal protected Prints and Advertising Fund which will insure the Company’s U.S. theatrical distribution.
"No matter how bad things are in the world, people need to be entertained", states Yuri Rutman, Noci’s CEO. "And while the crowd mentality of panic in the U.S. financial markets exists, overseas, properly structured commercial films generate more revenues which add to bigger distributor buys with the Euro vs. USD."
Apart from Elliott Associates, other investors including billionaires,family offices from Wall Street to Silicon Valley to the Middle East to Russia have been parking their money into Hollywood.
Larry Ellison Of Oracle, Paul Allen Of Microsoft, Steven Rales, Fred Smith of Federal Express, Norman Waitt, the Co-Founder of Gateway Computers, Jeff Skoll Of Ebay, Marc Turtletaub of The Money Store, Roger Marino Of EMC Corp, Sidney Kimmel Of Jones Apparel Group, Minnesota Twins owner Bill Pohlad; Real Estate Developers Tom Rosenberg and Bob Yari, and, financiers Sheikh Waleed Al Ibrahim, Michel Litvak, and Philip Anschutz are all behind the finance of a lot of films that range from box office hits to Academy Award winners.
While the glamour of the movie business may be appealing to most, at the end of the day, it is still an unknown business that many try to gamble on, and only a handful come out as winners. The real key is to minimize risk, maximize profits, and offer a steadier stream of revenues than what other alternative investments may offer such as real estate, oil & gas, commodities, hedge funds, or practically any other investment in today’s market.
The Company is putting together a slate of films using an innovative hybrid public-private finance strategy aimed at investors who either want to take a 100% Federal deduction under Section 181 or "The American Jobs Creations Act" against their ordinary income, get an additional 20-40% in tradable and monetized state tax credits or cash rebates, have a hedge of revenues from 20-30 films, a possible exit IPO on the London AIM., as well as stimulating local economic development, and creating jobs, including for women and minorities. Plus the Company is offering an alternative 100% principal protection of capital using Constant Proportion Portfolio Insurance.
"I don’t know of any other alternative investment that can offer tax incentives, multiple exit strategies, an opportunity to guarantee 100% of capital, as well as giving back to the American economy and labor, while being involved with the moviemaking process", states Yuri Rutman,. "That would also add to the long line of recent film funds that have been structured with numerous hedge funds, private equity investors, corporate tax credit buyers, and institutions. Heck I don’t even know of any business that someone can start where they know they will receive an exact ROI before they see any profits".
"I am also surprised how many investors, hedge funds, VC, tax planners, CPA’s, tax attorneys, public and private companies have no clue about these benefits", Rutman adds. "Federal Preservation, New Markets Tax Credits, etc was the usual route for tax credit planning or alternative investments , but film production incentives offer a more liquid premium, equity, as well as a little Hollywood adventure and schmoozing with movie stars."
Rutman adds "Plus, I am reinventing ‘conscious’ film finance. A lot of competitor deals have proven that they didn’t do their homework and won’t be around in a few years because they didn’t do their homework. I want to be making movies when I am 90".
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