Today's Top Stories Also Noted: Spotlight On... Smaller SAC settlement approved News From the Fierce Network:
Today's Top News1. Bill Ackman's personality draws attention
Pershing Square Capital Management President Bill Ackman has been a well-known figure in the hedge fund industry for years. But his recent short gambit regarding Herbalife and his personal acrimony with Carl Icahn have pushed his stature to a new level. He's on the verge of becoming a public figure. (He's already had the requisite Vanity Fair profile published.) Ackman is an intriguing character, one that is highly mediagenic beyond Wall Street. People would find him compelling, given his brash personality and overly direct manner. Deal Journal notes several examples of the latter. To a fellow student at Harvard Business School, Ackman said that, "You know, I'm just saying this because I have your best interests at heart, but you have too much makeup on." Ackman told a lawyer who works with his firm that, "You're old, you're fat, and you're invaluable, and I want you to lose weight." The person on the receiving end took it in the right spirit: "And I was old and fat, and hopefully invaluable …. And now I'm 60 pounds lighter." You can only get away with this if you are making people rich. Once that stops, you become just another socially awkward guy -- a misfit. My sense is that Ackman has carefully cultivated his public persona. He perhaps wants to be known as super-direct and super-bright and perhaps misunderstood--a man operating intellectually at a higher level than everyone else. In the end, he has used that persona to bring attention to himself and to his investments in ways that perhaps could best be seen as strategic, and highly effective. For more: Related articles:
Read more about: Pershing Square Capital Management, Bill Ackman
2. Goldman Sachs moves into BDC market
Goldman Sachs seems to be going downstream a bit with its plans to target middle market companies for more lending business. But as with all things Goldman, there are some skeptics about its intentions. The Financial Times reports that Goldman Sachs intends to launch a publicly traded closed-end Business Development Corporation (BDC), one that would target the debt--and possibly the equity--of smaller companies. BDCs are required to pay out 90 percent of their income in dividends. In a filing, the bank argued that these companies have been neglected as of late when it comes to traditional lenders for a variety of reasons, many of which are regulatory in nature. Goldman Sachs is certainly no stranger to investing in distressed credits, and it's unclear if this fund will mark a departure. As of now, the fund might engage in direct lending to companies, or it might stick to trading credits. Currently, Goldman Sachs does make loans directly to companies, but not through the asset management unit that will house the BDC. The new vehicle will be launched via the bank's Liberty Harbor unit, which runs a group of credit-focused funds among other things. One source told the paper that the bank "might have had to shut down" the entire unit due to Volcker rule concerns, if it didn't list it as a BDC. Indeed, there will likely be some who think that the unit is less bent on financing small companies to help them grow and more concerned with trading securities to make a profit. Of course, the goals are not incompatible. And pitching the unit as a BDC that aims to aids small companies is certainly preferable to pitching it as a de facto hedge fund with mutual fund-like properties. In any case, Goldman Sachs apparently convinced there is revenue to be had in this area. That said, there will be plenty of competition from established players. There is no guarantee of success for Goldman Sachs.
Read more about: BDCs 3. Wells Fargo director faces family conflict
It's probably a good thing that Philip Quigley is stepping down from the Wells Fargo board next month. He's considered an independent director by the bank, but that fact is, as reported by Bloomberg, that his son is a highly paid employee of the bank. And even though it's doubtful that the director's ability to serve has been comprised severely by his son's employment, it certainly does not look good. Independent directors are supposed to be free from material relationships, and a strong family connection is included under that umbrella. Quigley might have been the strongest, most independent voice in the boardroom, but it really doesn't matter in this day and age, where optics are a chief concern. The arrangement is anything but fair to the director or his son Scott, who works in a highly coveted spot in a principal investments group, investing deposits and excess cash in debt instruments. The unit is said to be highly profitable. To some, the unit might recall the infamous CIO investment unit at JPMorgan Chase, which also made proprietary investments. To reflect the tricky nature of the director's position, can you imagine if the Wells Fargo unit ran into similar trouble, one that required the attention of the board? At that point, the director would be hopelessly conflicted and would have to bow out of any and all decision making related to the issue, even if his son were not directly involved in botched trades. The board perhaps could have been more proactive on this. Philip Quigley started as a director in 1994. His son started at the firm in 2006. To be fair, when he started, he might have been sufficiently junior that the relationship was seen as inconsequential. But he fared well as of late, making $1.2 million in 2012. For more: Related articles:
Read more about: Wells Fargo, bank directors 4. Hedge fund managers fail with retailers
It takes a certain type of personality to succeed as a top hedge fund manager. You need loads of ambition and confidence. As it happens, that personality type can really get under the skin of corporate managers, who sometimes see them as financial interlopers, adept at swooping in and rattling cages. But running an activist hedge fund does not give one the chops to run a company. So concludes the Washington Post in an article about of the state of JCPenney, under the influence of Bill Ackman of Pershing Square Capital Management, and Sears and Kmart, under the influence of Eddie Lampert of ESL Investment. "Today, the two American retailing icons look further from revival than they did when Lampert and Ackman entered the picture. The winners, so far, in addition to Lampert and his early investors, are the chains' competitors. They include Macy's, Kohl's, Target and TJX, all of which are run by traditional retailers, not hedge fund guys or their designees," the article notes. The ending to these stories have yet to be written. The Post notes that, "There's still time for Ackman and Johnson to prove us wrong. Any number of factors could change Penney's momentum. The company could emerge with a favorable result from the Martha Stewart litigation. There are whispers afoot of a significant refinancing, which could remove doubt about its ability to renew its revolving line of credit next year. Customers could come flooding in as the store makeovers are completed. Or not. Whatever happens, here's the bottom line to this convoluted tale: Retailing is a lot harder than it looks from Wall Street." For more:
Read more about: Hedge Funds, retailers
In the aftermath of what appears to be a successful go-shop period, it's clear that Michael Dell will do whatever it takes to preserve his role as the only CEO his company has ever known. Early on, as news of other bids trickled out, one might have thought that the computer company founder would remain true to his group, which includes private equity powerhouse Silver Lake and Microsoft. Indeed, according to Bloomberg Businessweek, some of his partners in the original bid assumed he would be "hostile" to the competing offer from Blackstone. But as it turns out, they are now convinced of just the opposite. They are now of the view that Dell could easily drop the original partnership and join the group headed by Blackstone. But there's a big caveat. Dell will not easily give up his company and will do whatever it takes to remain in control. As of now, that means imposing a big condition on Blackstone. He'll support the bid if and only if he is allowed to stay on as CEO, reports Bloomberg Businessweek. My sense is that Blackstone is amenable to such an arrangement in theory. There will snags to negotiate, however, such as the status of David Johnson, the former Dell M&A executive now working for Blackstone. Michael Dell might find it awkward if Johnson were to become a director at the company or to remain in a position of influence with Blackstone. In any case, at this point, you would have to give Silver Lake and Blackstone a roughly equal shot at prevailing in a winning transaction offer. Michael Dell himself seems bent on determining the winner. For more: Related articles: Read more about: David Johnson, lbo Also NotedSPOTLIGHT ON... Smaller SAC settlement approved In some minor good news for the SEC and SAC Capital, a U.S. district judge has approved a $14 billion settlement of civil charges related to insider trading. The suit alleged that the firm's Sigma Capital unit illegally used information obtained by an analyst to make trades in certain technology stocks. The bigger SAC settlement agreement, requiring a record $602 million payment, resolves insider charges related to trades in pharmaceutical stocks. That settlement, however, remains in limbo as another judge ponders the facts and awaits other judicial decisions. Article Company news:
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Wednesday, April 3, 2013
| 04.03.13 | Bill Ackman's personality draws attention
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