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2. Will top JPMorgan execs face perjury charges?

In the wake of the Dell LBO announcement, the go-shop process is in full force, with Evercore given special incentives to find a superior deal.

Several firms have taken a look-see, the likes of Lenovo, Hewlett Packard, and Carl Icahn. KKR was even rumored to have been interested, but the firm said to be the most actively involved in actually putting forward an actual bid remains Blackstone Group.

According the Bloomberg, Blackstone may bid as part of a larger group that includes unspecified investors, perhaps limited partners of the firm. It would be less likely that Blackstone teams up with other private equity companies, given the sensitivity over club deals as of late, but you never know.

In any case, the go-shop process is scheduled to run through March 22. So we should have some news fairly soon.

These developments come on the heels of some disenchantment with the current deal. The stock of the troubled computer maker has been hovering above the $13.64 per share offer price, and many think that Michael Dell will be forced to enter a bidding war. That would be great news to long-suffering shareholders, some of whom fear an LBO at these levels because it would force them to swallow huge losses on their investment. A better deal wouldn't provide many with actual capital gains but rather smaller capital losses.

At this point, you would have to think that Michael Dell and SilverLake are pondering their options. Any deal will have to be approved by a majority of shareholders, excluding Dell himself.

For more:
- here's the article

Read more about: Dell, lbo
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By Jim Kim

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3. Dimon in the jaws of the London Whale

In a rather ominous development for JPMorgan Chase (NYSE:JPM), the Financial Times reports that Senate aides "are looking for inconsistencies in statements made by Jamie Dimon, chief executive of JPMorgan Chase, and Doug Braunstein, former chief financial officer, as they consider whether to make referrals to securities regulators and the justice department."

The SEC is also taking a look at related issues.

In the wake of the blockbuster, damning report about JPMorgan executives and their conduct as the London Whale "hedging" fiasco unfolded, this move is anything but surprising. The goal of prosecutors is to determine if any of the statements by executives were at odds with the conclusions of the report. More to the point, they are looking for perjury, for examples of executives claiming ignorance or even lying when they well knew what was going.

For example, "In a letter to the Senate banking committee following his June 2012 hearing, Mr Dimon said he did not have a role in deciding or implementing the change to the model for VAR, a standard industry measure of possible loss exposure."

It also noted that, "In an internal January 2012 company email published by the Senate investigations panel, Mr Dimon replied "I approve" to a request to raise the VAR limit pending the introduction of a new model. However, while the email shows Mr Dimon approving a temporary increase in the risk limit and being made aware of the new model, it does not show him approving a change in the model."

If investigators discover meaningful instances of perjury, they might recommend to the Justice Department and others that specific executives be charged with fraud. This has happened before. The same committee made a referral to the Justice Department back in 2011 that Goldman Sachs executives including CEO Lloyd Blankfein be prosecuted for perjury in the wake of the release of a blockbuster report about the bank's CDO activity. That forced several top executives to lawyer up, hiring top criminal defense attorneys.

Eventually, however, the department decided not to file charges.

For more:
- here's the article

Read more about: JPMorgan Chase, Perjury
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By Jim Kim

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4. What it will take to boost the Dell offer?

Earlier this week, I wrote that the Senate report into the London Whale "hedging" fiasco came at an inopportune time for JPMorgan CEO Jamie Dimon.

At the upcoming annual meeting, shareholders will vote on a proposal that would split the CEO and chairman jobs, which are currently both held by Dimon. Given the damning nature of the report, I suggested that Dimon could be in danger of losing the chairman job.

Others, however, are going one step farther and suggesting that Dimon could be in danger of losing both of these jobs, which would be a shocking development to this very twisty tale.

From a New Yorker column: "there can be no doubt that his career is on the line. For years now, he has been Wall Street's untouchable: the magazine-cover star who, when many of his rivals were crashing and burning during the financial crisis, guided his bank through it all, mostly unharmed. He's been invited to the White House (several times); Warren Buffett said he would be an excellent Treasury Secretary; he's even been (largely) forgiven for whining about people criticizing bankers and their humungous pay packages."

It continued that, "He won't necessarily get through this one. If the feds were to indict any senior JPMorgan executives on charges arising from the Whale's trades, which generated more than six billion dollars in losses, Dimon's position could rapidly become untenable."

Indeed, the board may be getting restive. Published reports have maintained that a few directors are said to be uncomfortable with the conduct of the CEO as the crisis unfolded. The fact that they are letting this be known is telling in and of itself.

This point is well taken: If top executives are criminally charged and of course if he himself is charged with perjury or other crime, then the board will have to act. At this point, the odds favor Dimon enduring this latest setback, but you never know.

For more:
- here's the column

Read more about: London Whale, JPMorgan Chase
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By Jim Kim

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5. New money market fund reform proposals

With Dell stock continuing to trade above $14 a share, it would be easy to conclude, as many have, that a higher offer is forthcoming, be it from an outside group or from Michael Dell and his partners-in-LBO at SilverLake. But that may be a bit rosy at this point.

DealBook notes that there are plenty of reasons why a more valuable deal will be hard to produce. Consider the issue from the perspective of Michael Dell.

"Here's one way of looking at it: Raising the bid by a dollar a share would cost about $1.8 billion, so getting to the $15-a-share bid that some analysts have predicted will succeed would add about $2.3 billion to the deal's price."

It noted also that, "It's unclear who might bear the cost of providing the additional capital. Mr. Dell is rolling over the roughly 16 percent of shares that he controls, as well as providing around $750 million in money. His partner, Silver Lake, is paying about $1.4 billion."

Finally, "Silver Lake is balking at adding any more money to the deal, according to people briefed on the thinking at the firm. The private equity firm's contribution is the largest it has committed to a deal, and so far it has said that it will not pay any more. (Of course, that could very well be a negotiating strategy.)"

At this point, the only deal on the table is from Michael Dell and SilverLake. But the go-shop period is proceeding, and you can bet that Evercore is actively soliciting offers, as it has been given special incentives by the board's special committee.

What would really get the party started would be another firm offer, which may or may not be forthcoming. One issue facing potential bidders "is that paying for an alternative deal is getting to trickier. A bevy of banks are already arranging debt for Mr. Dell and Silver Lake: Bank of America Merrill Lynch, Barclays, Credit Suisse and the Royal Bank of Canada."

In the end, this will play out over many months, though the next milestone may be the end of the go-shop period. At this point, the current deal offer may be the best bet.

For more:
- here's the article

Read more about: Evercore, Dell
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By Jim Kim

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