Dealbreaker

Posts by Dealbreaker

Write-Offs: 08.29.14

$$$ JPMorgan Hack Said to Span Months Via Multiple Flaws [Bloomberg]

$$$ Ukraine Invasion Claims Wipe Out Russia Bondholder Gains [Bloomberg]

$$$ Brazil Falls Into Recession with Second Quarter GDP [Reuters]

$$$ A Midtown landlord is taking cramped city living to new heights — by renting a 2 bedroom apartment with 22 beds, according to a video posted online. Hawking what appears to be an illegal hostel, the apartment owner touts the “amazing location” for “young professionals” on 27th Street and Third Avenue. [NYP]

$$$ Woman Discovers Her Cat Is Cheating On Her, Living Double Life [HP]

$$$ That’s it for us today! Enjoy the holiday and we’ll see you back here on Tuesday! Read more »

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Opening Bell: 08.29.14

Bank of America seeks to void verdict in $1.27 billion ‘Hustle’ case (Reuters)
Bank of America Corp on Thursday asked a federal judge to throw out a jury verdict finding it liable for fraud over defective mortgages sold by its Countrywide unit that resulted in a $1.27 billion penalty. The bank urged U.S. District Judge Jed Rakoff in Manhattan to rule for it as a matter of law or order a new trial, arguing that the evidence at trial did not support the jury’s October 2013 verdict. Bank of America said prosecutors were required at trial to prove that loans originated by Countrywide Financial Corp in a process called “Hustle” that were then sold to government mortgage finance giants Fannie Mae and Freddie Mac were not as good as the lender represented. “The trial evidence, even viewed in the light most favorable to the government, did not prove fraud under this standard,” the bank’s lawyers wrote.

Russian Recession Risk Seen at Record High Amid Sanctions (Bloomberg)
The chance of Russia’s economy tipping into a recession is rising as the escalating crisis in Ukraine raises the risk of the government in Moscow retaliating with further import bans, according to a survey of analysts. The probability of a recession in the next 12 months rose to 65 percent from 50 percent, the highest since the first such Bloomberg survey in June 2012, according to the median estimate of 26 economists in the poll. Russia will enact additional restrictions in retribution for sanctions imposed by the U.S. and the European Union, according to 15 of 25 economists. Of those, 12 expect Russia to target cars and consumer goods.

Project Funway: Code Names Help Spice Up the Art of the Deal (WSJ)
“Project Swift” sounds like the name of a military invasion or an Olympic marathoner’s training plan. But it is actually the code name for a corporate buyout, inspired by a private-equity associate’s fondness for singer Taylor Swift. Labels like Project Token, the name Apollo Global Management LLC used to mask its purchase of children’s restaurant favorite Chuck E. Cheese, or Project Fusion, the code for Kinder Morgan Inc.’s consolidation of its oil-and-gas holdings into a single company, are designed to keep reporters, traders and even rival companies from sniffing out deal news before formal announcements are made. For the young bankers who get to choose them, code names are an amusing diversion from the financial modeling and PowerPoint presentations that fill their days. But one deal-making powerhouse is putting an end to the name game, opting instead to automate the process to avoid the pitfalls that go with the territory. Goldman Sachs Group Inc. now requires bankers to use name-generating software that offers 10 random options like Project Calculator or Project Daniel. The new system has been phased in across the bank over the past two years, according to people familiar with it.

Angry Birds Chief To Step Down (WSJ)
Finland’s Rovio Entertainment Ltd., maker of the Angry Birds mobile game, said on Friday that Chief Executive Mikael Hed will step down in January—a move that comes amid the company’s recent struggles to refresh its games lineup and revenue model. Mr. Hed will be replaced by former Nokia Corp. executive Pekka Rantala, who joined Rovio’s executive team earlier this year. Rovio and its iconic Angry Birds games franchise has struggled in recent years amid stiff competition from a new breed of mobile games developers, such as Supercell Oy and Anglo-Swedish King Digital Entertainment PLC, the maker of the “Candy Crush Saga.” Mr. Hed, 38, has tried to overhaul the Finnish company’s games revenue model, making downloads free and charging users for purchases made in the games, but recent games haven’t made much of an impact.

Falcone’s tactics in buying steel company draw fire (NYP)
Phil Falcone couldn’t play by the rules on Wall Street — so now he’s playing where there aren’t any rules. That’s the charge from critics as the hedge fund tycoon moves to take over a little known but profitable steel fabricator whose shares are traded in the loosely regulated over-the-counter market. Falcone, who last year agreed to an $18 million settlement with federal regulators for misconduct that got him barred from the securities industry for five years, is using ruthless tactics to acquire the company, Phoenix-based Schuff International, on the cheap, according to rankled investors. Last week, Falcone’s new investment vehicle, HC2, created this spring from a shell company that’s also off the exchanges, floated a tender for Schuff shares to consolidate its ownership in the firm. That’s less than three months after a surprise May 30 announcement that HC2 had acquired a 65 percent stake.

Residents Of Noiva Do Cordeiro, Almost All-Woman Town, Seek Bachelors (HP)
Life is pretty sweet for the women of Noiva Do Cordeiro. According to the Telegraph, they have constructed a society in the southeast part of Brazil that is communal, egalitarian and almost all-female. But some of the women in the town say it would be nice to have a few more dudes in the mix. “I haven’t kissed a man for a long time,” Nelma Fernandes, 23, told the Telegraph. “We all dream of falling in love and getting married. But we like living here and don’t want to have to leave the town to find a husband. We’d like to get to know men who would leave their own lives and come to be a part of ours. But first they need to agree to do what we say and live according to our rules.” Read more »

Write-Offs: 08.28.14

$$$ Benmosche Sped Up AIG Exit Amid Year-to-Live Prognosis [Bloomberg]

$$$ KPMG Faces Criticism for Espírito Santo Audit Work [WSJ]

$$$ Dallas Fed President Richard Fisher Takes the ALS Ice Bucket Challenge [YouTube]

$$$ IMF board likely to back Lagarde during French probe: sources

$$$ Rob Ford once forced a football team to roll in goose feces [AP] Read more »

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Opening Bell: 08.28.14

Mega-IPO to rekindle the ‘bromance’ behind Alibaba’s rise (Reuters)
Masayoshi Son’s nose for an investment has turned a $20 million start-up punt on Alibaba into a stake worth maybe $50 billion or more as the Chinese e-commerce giant co-founded and led by Jack Ma heads to what could be the biggest U.S. tech IPO of all time. Son, CEO of Japanese telecoms firm SoftBank Corp, also put money into a young Yahoo Inc, co-founded by Jerry Yang, in 1995, and Yahoo’s subsequent investment in Alibaba saw Ma, Son and Yang build Alibaba Group Holding Ltd [IPO-BABA.N] into one of world’s biggest internet companies as China’s e-commerce market took off. “It was the look in his eye, it was an ‘animal smell’,” said Son of his decision to back Ma when they first met in 2000. “It was the same when we invested in Yahoo … when they were still only 5-6 people. I invested based on my sense of smell,” he quipped in a group media interview in May. Under pressure from investors, Yang quit Yahoo in early 2012 and gave up his seat on Alibaba’s board. He is now a founding partner of AME Cloud Ventures, a San Francisco venture fund. But next month, the three poster boys for Asian technology entrepreneurship, bound by a shared ambition and a taste for sushi and golf, are set to be reunited on Alibaba’s board following the firm’s long-awaited New York IPO.

Plan to slow ‘Flash Boys’ already has some holes (NetNet)
The Securities and Exchange Commission announced the proposal Tuesday in which 1,200 small-cap firms will be divided into three equal-sized groups with different standards governing each. One group—the “control”—essentially would trade the same as before; the second would see stock prices quoted in 5-cent increments, as opposed to the penny increments currently used; and the third also would trade in 5-cent increments but also would follow a “trade-at” requirement in which trading centers couldn’t match prices unless they display the best bid or offer. Ostensibly, the program’s goal is to “enhance market quality for smaller capitalization stocks for the benefit of investors and issuers,” according to the SEC. More practically, the changes are aimed at thwarting high-frequency traders who have used the lightly traded small-caps to skim profits by getting lower prices on purchase and higher prices on sales than their slower competitors…Inside the market, the SEC’s effort got points for effort but still raised some worries. “What does concern me is there are a bunch of exceptions thrown in there, particularly on test group three,” said Joe Saluzzi, a partner in Themis Trading and outspoken advocate for trading reform. “There may be a need for some, but that to me smells a little bit like some interests are now being put into the rule.”

JPMorgan, Four Other Banks Hit by Hackers: U.S. Official (Bloomberg)
Computer hackers targeted JPMorgan Chase & Co. (JPM) and at least four other banks in a coordinated attack on major financial institutions this month, according to a U.S. official. The attack led to the theft of customer data that could be used to drain accounts, according to another person briefed by U.S. law enforcement. The two people, who asked not to be identified because the investigation is continuing, discussed the incident after Bloomberg News reported a breach on banks earlier today. Hackers targeted customer and employee information, said a third person involved in the investigation, who was also briefed by the government. The theft involved gigabytes of data, said several people familiar with the attacks. The scale indicates a potential for significant financial fraud. Most thefts of financial information involve retailers or personal computers of consumers. Stealing data from big banks is rare, because they have elaborate firewalls and security systems.

FBI Examining Whether Russia Is Tied to JPMorgan Hacking (Bloomberg)
The sophistication of the attack and technical indicators extracted from the banks’ computers provide some evidence of a government link. Still, the trail is muddy enough that investigators are considering the possibility that it’s cyber criminals from Russia or elsewhere in Eastern Europe. Other federal agencies, including the National Security Agency, are now aiding the investigation, a third person familiar with the probe said.

Square Said in Talks for Funding at $6 Billion Valuation (Bloomberg)
Square Inc., the mobile-payments startup co-founded by Twitter Inc. Chairman Jack Dorsey, is in talks to raise financing at a $6 billion valuation, according to a person with knowledge of the matter. The San Francisco-based company is seeking about $200 million, with some of the funding coming from the Government of Singapore Investment Corporation, said the person, who asked not to be identified because the matter is private. That would push Square’s valuation up from about $5 billion earlier this year.

Amish Beard-Cutting Convictions Reversed (WSJ)
A federal appeals court on Wednesday overturned the criminal convictions of 16 Amish men and women in a series of beard and hair cuttings, finding error in how the jury was instructed on determining whether a hate crime occurred. In a 2-to-1 ruling, the U.S. Court of Appeals for the Sixth Circuit reversed the convictions on federal hate-crime charges and returned the case to the lower court. A spokesman for Steven M. Dettelbach, U.S. Attorney for the northern district of Ohio, said his office disagrees with the ruling and is reviewing its options, which include appealing the ruling, retrying the cases or dismissing the charges. The case against members of the eastern Ohio community of Bergholz involved a series of attacks in which other Amish were physically restrained while their hair and beards were shorn. Prosecutors charged those involved under the federal hate-crime law because the Amish consider the length of their hair a sign of religious devotion and the cuttings were to enforce a particular view of the religion. A jury in September 2012 found the 16 defendants guilty of hate crimes, including Bishop Samuel Mullet Sr., who was sentenced later to 15 years. They all appealed the hate-crime conviction, but Wednesday’s ruling doesn’t affect the convictions of certain defendants on charges such as concealing evidence. Read more »

Write-Offs: 08.27.14

$$$ Judge Fast-Tracks Valeant, Pershing Suit Versus Allergan [WSJ]

$$$ Argentina wants deal with all holdout investors together [Reuters]

$$$ Young Americans Hate Cash [BusinessWeek]

$$$ Ebola a long-term ‘blip’ for Africa investors [NetNet]

$$$ Russian Bank Will Give You a Free Cat With Your Mortgage [Gawker] Read more »

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Opening Bell: 08.27.14

Legroom Gadget Maker Sees Sales Jump After Air-Rage Case (Bloomberg)
The Knee Defender, a gadget that blocks airplane seats from reclining, got a global boost after a scuffle between two passengers forced a United Airlines jet to make an unscheduled landing. The gizmo’s website crashed today after traffic surged, and sales rose “substantially” for the $21.95 plastic clips that have been on the market since 2003, said the inventor, Ira Goldman. While a product that interferes with another flier’s comfort may rub some people the wrong way, the issue is airlines’ legroom cutbacks, Goldman said. Carriers are shrinking space between rows — Spirit Airlines Inc.’s allotment is about 10 percent less than the industry standard — and using thinner cushions to squeeze more people into coach cabins. “They don’t have Plan B for the fact that a lot of people, when they sit down in their seat at the gate, their knees already are hitting the seat-back in front of them,” Goldman said in a telephone interview from Washington. The Knee Defender hit the headlines because of an in-flight squabble on United Flight 1462, which had to touch down on Aug. 24 in Chicago en route to Denver from Newark, New Jersey. One person installed a device that prevented the passenger in front of him from reclining, said Charlie Hobart, a spokesman for United Continental Holdings Inc. The Associated Press, citing an anonymous law enforcement source, gave a more-graphic account: Upset that her seat was locked, one traveler threw water at a man who employed a Knee Defender and refused to remove it at the request of a flight attendant.

Tim Hortons’ Canadian Fans Leery of American Hookup (Bloomberg)
“I don’t like the idea of an American company buying a Canadian company — it’s our brand,” Crosgrey, 60, said as she sipped a Tim Hortons coffee with three creams at a food court in downtown Toronto. “Timmy’s is always trying new things, adapting, they always have good service, and you always get your coffee fast no matter how long the lineup is. Burger King may screw it up.”

A new king of Kickstarter about to be crowned (CNBC)
With a little less than three days before the Coolest Cooler campaign ends, the project raised $10,211,436 as of late Tuesday afternoon. It’s well on its way to surpassing Pebble’s $10, 266,845. Created by Ryan Grepper, the high-tech cooler is part blender, part waterproof bluetooth summer DJ speaker system, part USB recharge station, and yes, also a cooler to keep your stuff cold, with an LED light, cutting board and bottle opener. Although it may seem hard to believe that a cooler—the bread-and-butter of low-tech companies like Coleman—could be the most-funded project ever in a Kickstarter universe of gamers and wearable device nerds, don’t think for a second there wasn’t a lot of hard work that went into this success story. In fact, evolving the cooler has been a passion of Grepper’s for a decade, he told CNBC. “Nine or 10 years ago, I was making a blender out of a weed wacker, putting an old car stereo into a cooler.” His early experiments didn’t work, but Grepper—who is a member of the CNBC Tech Crowd Council—did realize technology could transform a cooler into something even the cool kids might coo over. Grepper didn’t give up easily either. The Coolest Cooler failed the first time he rolled it out on Kickstarter in November 2013. “We weren’t successful,” he said. “We thought tailgating folks would want it, and Christmas would work. But I hadn’t done enough homework.” The failure—the first incarnation of the Coolest Cooler raised a little over $102,000 of a $125,000 goal, connected Grepper with enough people to give him the confidence to expand the project’s design and Kickstarter campaign. By the time the Coolest Cooler rolled out its second bid for crowdfunding fame, on July 8, Grepper had learned a few valuable lessons about finding success on Kickstarter. “I learned that Kickstarter and crowdfunding is a visual medium and people want to see what they are getting and we weren’t there the first time. I took the design to the stage you see it at now.” Timing is also key—when it comes to a cooler, summer rules over Santa and Sunday football tailgating. “The cooler market is hot in the summer,” Grepper said. “That was one of those hindsight realizations.”

Hutchin Hill, Citadel See Assets Jump as Pensions Call (Bloomberg)
Neil Chriss is hitting his stride. The math doctorate turned hedge-fund manager founded Hutchin Hill Capital LP more than six years ago and built it to cater to large investors. After posting annualized returns of 12 percent, about six times the average of his peers, he finds himself in the sweet spot for fundraising. Hutchin Hill’s multistrategy approach is the most popular hedge fund style this year, helping the New York-based firm double assets by attracting $1.2 billion.

Casino Loses 21K After Armored Car Drives Off With Money On Roof (AP)
An armored car company will reimburse an Atlantic City casino after nearly $21,000 fell from the roof of one of its trucks. Police tell The Press of Atlantic City an internal investigation by GardaWorld found no wrongdoing. The company picked up the cash at the soon-to-be-closed Revel casino on Aug. 6. Surveillance video showed the bag holding the cash on the roof as the truck left Revel. The bag was still on the roof when the truck pulled away from nearby Resorts Casino Hotel. A search failed to recover the money. Read more »

Write-Offs: 08.26.14

$$$ Buffett to Get 9% on $3 Billion Burger King Investment [Bloomberg]

$$$ Inversion Critics and Investors May Be Misjudging Burger King Deal [Dealbook]

$$$ Burger King Defends Plan to Buy Tim Hortons [WSJ]

$$$ Apple Said to Prepare New 12.9-Inch IPad for Early 2015 [Bloomberg]

$$$ Man Eats Pasta Off Subway Floor To Prove Vacuum’s Effectiveness [HP] Read more »

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Opening Bell: 08.26.14

Ackman Gains 30% With Burger King, Herbalife Wagers (Bloomberg)
Since Ackman’s three-hour presentation in Manhattan on July 22 that sent Herbalife’s stock soaring, the company has slumped 26 percent after reporting disappointing earnings. Ackman’s $1 billion bet that the firm’s shares will collapse has helped spur the money manager to his best year since 2009. Pershing Square Capital Management LP’s oldest fund has gained about 30 percent this year, according to a person with knowledge of the returns, compared with the average 2.5 percent for the hedge-fund industry. He’s done it through big wagers on a small group of companies. Yesterday, Ackman’s firm made $203 million on Burger King Worldwide Inc. after the fast-food chain said it was in talks to buy Tim Hortons Inc.

Warren Buffett to Help Finance Burger King’s Takeover of Tim Hortons (WSJ)
Investor Warren Buffett is helping finance Burger King Worldwide Inc.’s planned takeover of Canadian coffee-and-doughnut chain Tim Hortons Inc., according to people familiar with the matter, in a surprise twist that could add to investors’ enthusiasm for the deal. The Berkshire Hathaway Inc. BRKB +0.35% chairman and chief executive would invest in the deal in the form of preferred shares, some of the people said. Berkshire is expected to provide about 25% of the deal’s financing, one of the people said. The exact structure of Mr. Buffett’s participation in the deal remains unclear, and the discussions are ongoing.

Hedge Funds Sue to Get Argentine Bond Payment in London (Dealbook)
A group of hedge funds, including George Soros’s Quantum Partners and J. Kyle Bass’s Hayman Capital, is seeking a 226 million euro interest payment on Argentine bonds from Bank of New York Mellon that was blocked by a United States judge last month. In a lawsuit filed in London against Bank of New York, the trustee handling Argentina’s bond payments, the hedge funds contend that the bank’s London unit must release money that was deposited by Argentina for its euro-denominated bondholders. The money was part of a $539 million interest payment that Judge Thomas P. Griesa of the Federal District Court in Manhattan prevented the trustee from paying last month. The latest lawsuit, filed last Thursday, poses a challenge to the scope of Judge Griesa’s ruling and will further complicate what has been a long and drawn out battle between the government of Argentina and a group of New York hedge funds that have waged a court battle that has lasted years.

Why Amazon Is Paying $1 Billion to Help People Watch Video Games (BusinessWeek)
There are a few reasons Amazon would want Twitch, some of them Amazon-specific, others more general. First, a primer on Twitch. It’s a website on which people watch other people play video games. Some of the people playing are experts; others aren’t even all that good. To understand why Amazon would pay for a website such as this, you have to accept one fact: People like watching other people play video games. This consistently baffles many non-gamers, but it’s true. Twitch, founded in 2011 as part of now-defunct Justin.tv, has 55 million unique monthly users, and 7 million people log onto the website each day. While Web entertainment is reputedly all about short attention spans, Twitch users stick around for nearly two hours per day on average. Any company that attracts such deep levels of engagement is going to appeal to Silicon Valley’s acquirers, not least because advertising to those people could be very lucrative. And Amazon is increasingly interested in building its advertising business.

Quake leaves Napa Valley vintners with dregs (NYP)
The cherished $13 billion Napa Valley wine industry in California is picking up the pieces after it was ravaged by a 6.0 magnitude earthquake Sunday that left winemakers scrambling to salvage their last remaining bottles of red and white. “We’re wading around in a sea of Cabernet,” Henry Hill & Company wine warehouse owner Bill Hill told NBC News. Hill said his company’s building — which housed nearly 1,000 barrels of wine, including the pricey and highly sought after Cabernet Sauvignon — felt the full brunt of the earthquake and suffered “severe” damages. The epicenter of the earthquake was only six miles Southwest of Napa, which is home to approximately 430 wineries that contribute to an enormous industry with an annual economic impact of $50 billion, NBC News reports.

British man fined for fake kidnapping claim so he could stay out partying (NYDN)
A man has been fined by police after he told his girlfriend he had been kidnapped just so he could stay out all night partying. Officers spent seven hours searching for the man from Bolton, in northwest England, on Friday. His girlfriend had gone to the cops after he told her he was being held against his will over a debt. Instead he was at a house party. The 32-year-old was found after police checked closed-circuit TV footage taken close to his home, reported the BBC. “Considerable resources and time went into finding this man, who it transpires made the entire thing up so he could stay out and party,” Det. Insp. Jo Clawson said. “This is without doubt one of the most foolish and irresponsible incidents I have been involved in.” Read more »