Today's Top Stories Also Noted: OpenText News From the Fierce Network:
Today's Top News1. Analyst cut Facebook revenue estimates during roadshow
In the aftermath of the Facebook IPO, it's clear that several parties contributed to the disappointing offering. It's clear now that a great re-think of the issuer's models took hold in the days before the offering. As it turns out, that rethink was prompted in part by Morgan Stanley's consumer Internet analyst Scott Devitt, who cut his revenue estimates for the second quarter significantly as well as his full-year 2012 revenue forecast, reports Reuters. You have to give him credit--and Morgan Stanley for that matter--for making these estimates known to top clients. The report, however, wasn't widely publicized, and it's unclear if retail investors and their advisors knew about it. Had it received more attention, who knows what the full effect would have been. Can you imagine pre-deal headlines blaring something like, "Respected Analyst for Facebook Underwriter Slashes Revenue Estimates"? That might have significantly exacerbated the effect of the news that GM was pulling its Facebook ads due to lack of effectiveness. The move also followed an amended prospectus filed by the issuer, which was more cautious on revenue growth. At the institutional level, the disclosure of the analysts' move had a big impact. According to Reuters, some were downright shocked. Typically, underwriters release their own analysts' research about one of their IPO companies after 40 days. It will be interesting to see what Devitt's research says about the stock. Given the way the stock is trading, it will not necessarily be bearish. It might be strong buy based on valuation. We'll just have to wait and see. For more: Related articles: Read more about: Morgan Stanley, Facebook IPO
2. Smaller profits from purchases of failed banks
The carnage in the banking industry over the past few years has brought out the vultures, who eyed failed banks in hopes of swooping in to purchase them at bargain basement prices. Private equity firms have led the charge. So how have buyers fared? Since 2010, the gains have been impressive, according to a new analysis by SNL Financial. The buyers of failed banks have booked gains of at least $1.6 billion since 2010, but that may represent a high water mark of sorts, as the gains seem to be getting smaller. "In 2009, bargain purchase gains were disclosed for 46 of the 130 government-assisted transactions with buyers, aggregating to a gain of $2.68 billion, which compares to $959.8 million in 2010 and $669.6 million in 2011. In 2010, there were 149 failures, excluding liquidations, of which 65 transactions included a publicly disclosed gain on bargain purchase. In 2011 there were 90 transactions, excluding liquidations, aggregating with 38 deals including a publicly disclosed gain on bargain purchase." Per deal, there could well be some big winners out there. One has to assume that the big private bailouts will likely decline as the industry recovers. That's the hope anyway. For more:
Read more about: banks, Bank Deals 3. JPMorgan speaks softly against Volcker Rule
The conventional wisdom is that the multi-billion trading loss racked up by JPMorgan, the result of a massive bet that the corporate bond market wouldn't plunge, weakened the moral authority of CEO Jamie Dimon. He was perhaps the highest profile critic of the proposed rule, which sought to prevent banks that benefit from federal deposit insurance from making wild proprietary bets. His critique at times bordered on downright rude, as he ridiculed proponents of the rule, notable Paul Volcker himself, in insulting, personal terms. The trading debacle might force him to be more politic and circumspect in his public utterances. This was evident from his appearance at a recent financial conference. "I don't disagree with the intent of the Volcker Rule," Dimon was quoted by DealBook, which also noted, "While he confirmed a perspective conveyed in earlier statements, Mr. Dimon took a more moderate stance on the regulation than in the past when he had warned that the rule could have 'huge negative unintended consequences.' " To be clear, he still believes that the rule runs the risk of going too far and might cut back on activities that should be legitimate, such as hedging and market making. But the current rule as proposed would allow such activity. The crux of the controversy is that it is proving difficult to come up with a regulatory system that can differentiate easily between proscribed activity and allowed activity. In any case, it will be interesting to see how long it will be before he loosens his muzzle on terms of the anti-Volcker Rule rhetoric that proved so mediagenic. For more: Related articles: Read more about: Volcker Rule 4. JPMorgan's loss is other banks' gains
Jamie Dimon, the embattled CEO of JPMorgan, picked up a public show of support recently from none other than Brian Moynihan, the CEO of Bank of America, one of JPMorgan's biggest competitors. Moynihan said that Dimon has the experience and the skills needed to manage the fallout from trading losses. "He'll manage through it," he was quoted by Bloomberg. But JPMorgan's loss is Bank of America's gain. Indeed, Bank of America, along with Goldman Sachs and other banks and hedge funds, have taken the other side of many of JPMorgan's controversial CDS index trades, and they have been rewarded handsomely. It's a zero-sum game, and every trading dollar that JPMorgan loses translates into a concomitant gain for counterparties. These positions for the most part have not been closed out. It's unclear how the dust will settle. A lot may depend on expiration dates. According to some reports, some experts think that the losses could eventually hit $7 billion on paper, which would more than wipe out second quarter profits at JPMorgan, which were expected to be $4 billion before the trading fiasco was announced. What we may be seeing is a lot of market froth as hedge funds bid up the value of the CDSs sold by JPMorgan, sensing blood. Once the froth settles, fundamentals may take hold a bit, which might bid up bonds in an improving macro environment. That may mute the paper losses on the derivatives somewhat. We'll just have to see how this plays out. Right now, it's JPMorgan against the world, and the world is winning. For more: Related articles: Read more about: Hedge Funds, Counterparties 5. Wall Street awash in Dimonfreude
The Washington Post notes that a new term has been coined in the banking industry: Dimonfreude. There may be some executives at competitors who are really enjoying watching the debacle over JPMorgan's multi-billion trading fiasco play out. There will always be people who enjoy watching the mighty take a tumble. It can be very entertaining. For years, JPMorgan CEO Jamie Dimon, "America's least-hated banker, as he was known, has worn a halo over those pinstripes. Dimon has been called President Obama's 'favorite banker'. Institutional Investor magazine has called him the country's best CEO for two years running. And his actions during the financial crisis have been painted in patriotic terms: Press reports said he 'answered the call' from then-FDIC chairman Sheila Bair to buy Washington Mutual, one of two banks he scooped up during the financial meltdown, and he has cited a patriotic duty to a country in crisis as why he took in $25 billion in government aid. Yet now, Dimon is in the hot seat." No doubt his reputation has been sullied, and his moral authority on regulatory affairs has been attenuated. This represents a terrific challenge for his PR staff. The goal now is reposition the CEO as someone whose past good deeds have built up an unusually large bank of political and media capital that will pay dividends now. A lesser CEO perhaps would not be able to survive. The PR staff needs to spin events as follows: A strong CEO uncharacteristically allows his bank to stumble, but then he rolls up his sleeves to make the bank stronger than ever, for the good of the industry and shareholders. My guess is that "Saint Jamie" will be on top again soon enough. His competitors may not want to gloat too much. For more: Related articles: Read more about: Jamie Dimon, trading Also Noted
SPOTLIGHT ON... Hedge funds need better governance models I've noted that institutional investors have prodded hedge funds to take compliance and administrative matter more seriously as well as to become more investor friendly. A commentary in Pensions & Investments suggests that funds need to embrace an effort to upgrade their governance activities. "A consensus is finally emerging that existing fund governance standards have become inadequate because of obsolete metrics and other factors. Effective fund governance provides a system of checks and balances to support the four pillars of investor protection promulgated by the SEC: guarantees that investments are managed in accordance with the fund's investment objectives; insurance that investors' assets will be kept safe; security that when investors redeem they will get their pro-rata share of the fund's assets; and credible assurances that the fund will be managed for the benefit of investors, not the fund's service providers." Article Facebook News: Company News: Industry News: Regulatory News: And Finally…Working after you retire? Article
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Wednesday, May 23, 2012
| 05.23.12 | Facebook revenue estimates cut during roadshow
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment