Today's Top Stories Also Noted: Quest Software News From the Fierce Network:
Today's Top News1. Morgan Stanley's next IPO target
Even though the price of Facebook has recovered a bit, there's still a palpable pall over the IPO market. What the market needs is a few solid offerings that say to the world that Facebook was an isolated incident -- that there is still demand out there, and that there are still plenty of companies worthy of public offerings. Morgan Stanley isn't about to wimper away. Deal Journal notes that Service Now, a San diego-based cloud software vendor, is aiming for an offering that will be underwritten by Morgan Stanley. However, "this deal has some key contrasts to Facebook's. It is not being run by Michael Grimes, the Silicon Valley-based Morgan Stanley banker who led the Facebook IPO. ServiceNow has a longstanding relationship with Paul Chamberlain, co-head of Morgan Stanley's tech banking practice, and he is leading the deal, people close to the IPO have confirmed. ServiceNow is also selling only a small slice of the company, just 9.7%. That follows the playbook for many U.S. tech IPOs before Facebook." The company aims to complete its offering sometime in June. People are definitely seeing it as a litmus test for the market. I hope for the best. The roadshow has begun. For more: Related articles: Read more about: Morgan Stanley, IPOs 2. Trustee vs. New York AG for Madoff funds
New York Attorney General Eric Schneiderman has inked a settlement that calls for J. Ezra Merkin--the hedge fund manager who runs Ariel Fund, Gabriel Capital, Ascot Fund and Ascot Partner--to pay $405 million investors to cover losses that stem from Merkin's investment with Bernard Madoff. The agreement, expected to be announced on Monday, did not require the consent of Irving Picard, the controversial trustee tasked with recovering funds on behalf of victims. The New York Times reports that the deal is "likely to be disputed" by Picard, who has sued Merkin in federal court. In this view, "Mr. Merkin's management fees were paid with cash that Mr. Madoff stole from other people and paid out to Mr. Merkin's investors. Therefore, they contend, any settlement with Mr. Merkin should benefit all eligible Madoff victims, not just Mr. Merkin's clients. Moreover, Mr. Picard is determined that all Madoff claims should be handled through the federal bankruptcy court, not through piecemeal litigation that benefits only small groups of investors." It may be that the settlement ends up tied up litigation that will stretch out for many years, denying funds to the victims, the likes of the Harlem Children's Zone and the Metropolitan Council on Jewish Poverty in New York. This is yet another sign that the recovery effort has taken on a life of its own, a very expensive one at that. For more: Related articles: Read more about: Bernard Madoff, Trustee 3. Citigroup to resolve CEO pay issue
It was nothing short of stunning when shareholders rejected, via a say on pay vote, the compensation plan that the Citigroup board awarded to CEO Vikram Pandit for his work in 2011. The board thought he was quite deserving of the $15 million and an estimated $40 million retention plan. Now the Citigroup board has quite a task head of it. It cannot afford to stick stubbornly to its original compensation plan, but it intends to reward Pandit for returning the bank to profitability and for taking $1 in salary for two years. Pandit says the board will make a decision on what to do about executive compensation before the end of the year, reports Bloomberg. It will be imperative for the board's compensation committee to reach out to the shareholders that led the rebellion. The last thing it needs is for this to turn even more testy than it already is. The board certainly doesn't want this to explode into a big controversy that makes them the poster child for excessive, non-aligned pay. With that in mind, the board may want to reach out to New York City Comptroller John Liu, whose office controls about nine million Citigroup shares. He has not been consulted, but he was quoted saying, "We can accept a months-long process to revamp executive compensation if the board truly consults shareowners and ultimately restores the link between pay and long-term performance. We have yet to see evidence of either." For more: Related articles: Read more about: Citigroup, ceo pay 4. Short sale target Evergrande fights back
I noted recently that a big-time bulls-bears war has broken out over Evergrande, which was the target of a negative research report by short-seller Citron Research--yet another example of short sellers targeting Chinese companies. The stock promptly took a big hit, but Deal Journal notes that the company is now fighting back, with some help from an unlikely group: Sell-side analysts. Analysts at bulge bracket firms "have come out in the company's defense, prompting Evergrande to release a statement on Sunday highlighting the investment banks' swift counterattacks against Citron. In the statement titled 'Eight Famous Investment Banks Support Evergrande to Dispel Rumors Spread by A Short Seller,' Evergrande said the efforts by these firms have helped stabilize its stock and restore market confidence. The eight banks Evergrande names include Citigroup Inc., Deutsche Bank AG, J.P. Morgan Chase & Co., Bank of America Merrill Lynch, Credit Suisse AG, UBS AG, Macquarie Group and DBS Group Holdings." The stock has recovered a bit. All in all, there's been a lot of hype about Chinese property companies, and some contrarians have argued that a bubble has been building, one that is bound to burst. In the end, all this amounts to good sign; as these sorts of conflicts break out, as the more information about small stocks that makes it to the public, the better off we'll be. In theory anyway. The ball would appear to be in Citron's court. For more: Related articles: Read more about: short sellers, Stock Research 5. JPMorgan's trading loss hurts its credit ratings
What might have been for JPMorgan? The big U.S. bank did not fare poorly in the Moody's bank downgrade action. In fact, it remained in the top tier of banks, as identified by Moody's, along with HSBC and RBC. The senior debt of JPMorgan's main operating unit fell two notches, from Aa1 to Aa3, but its standalone credit rating fell 3 notches, from Aa3 to A3. The rating company praised the bank's "shock absorbers" and its earnings diversification. But it's clear that the bank's multi-billion trading fiasco, which will likely affect second-quarter earnings, played into is decision-making process in a powerful way. Moody's said that this standalone credit rating reflects "the risks related to JP Morgan's (i) very large capital markets business (representing 26% of reported firm-wide revenues in 2011); (ii) relatively high absolute level of secured and unsecured wholesale funding within the overall balance sheet; and (iii) the recent control failure within its Chief Investment Office (CIO), which has tarnished JP Morgan's otherwise strong track record of risk management." The report also noted that, "JP Morgan's recently announced loss within the CIO was an important factor in the downgrade of the standalone credit profile. It illustrates the challenges of monitoring and managing risk in a complex global organization – and highlights the opacity of such risks. The firm has substantial earnings and liquidity, which affords it the time to work out of the positions. Management is also acting aggressively to stem the losses and has already added new controls to the CIO." Had it not been for the big Whale-driven losses, the bank just might have ended up in a category all by itself, a bank truly set apart. What an achievement that would've been for the bank and CEO Jamie Dimon. It wasn't to be, but at least the bank is still in the top tier. For more: Related articles: Read more about: Credit Rating Also Noted
SPOTLIGHT ON... High court declines to review Madoff plans It's hard to disagree with the decision by the Supreme Court not to hear a case that could have changed the way losses were calculated for victims of the Bernard Madoff Ponzi scheme. The ruling upholds trustee Irving Picard's methodology, which is to calculate losses based on withdrawals less investments. Some investors wanted the losses to be calculated on statements, which would generally show higher losses and more victims. Article Company News: And Finally…Surface to be wi-fi only. Article
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Tuesday, June 26, 2012
| 06.26.12 | Morgan Stanley's next IPO target
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