Jefferies Bumps Up Against Big Rivals as It Looks to Expand (WSJ)
As Jefferies evolves from its roots as a trading firm to a midtier investment bank, it is knocking up against far larger financial firms vying for business, often from companies Jefferies helped to expand. Jefferies has often worked with smaller firms on transactions that bigger rivals may not pursue. As these customers get larger, the competition intensifies as they are courted by bigger financial firms. In 2014, Jefferies has been a lead underwriter on 25 U.S.-listed initial public offerings of health-care-related companies, topping all other investment banks, according to data provider Dealogic. But Jefferies ranks just eighth in net revenue generated by U.S. health-care banking overall—which includes stock and bond offerings, loans and merger advice—generating $196 million in revenue, trailing No. 1 J.P. Morgan Chase & Co.’s $639 million. “Investment banking has always been highly competitive,” Jefferies Chief Executive Richard Handler said in an interview at his office, just off the trading floor. The firm isn’t attached to a bank holding company and therefore has more flexibility in how it structures deals and compensates employees. This entrepreneurial structure was part of the allure when Mr. Lorello moved to Jefferies in 2009 with more than 30 health-care bankers, according to people familiar with the firm. Jefferies is a unit of Leucadia National Corp. and has net revenue topping $3 billion. “Our competitive advantage has never been stronger in the 25 years I have been at Jefferies,” Mr. Handler said.
Steven Cohen’s Ex-Wife Gets Outside Financing for Lawsuit (Dealbook, related)
Helping to fuel the long-running legal battle is Asta Funding, a financial backer of a Beverly Hills, Calif., firm that has provided litigation financing to Ms. Cohen, according to court documents and people briefed on the matter. Asta and the firm that is financing Ms. Cohen’s lawsuit — Balance Point Divorce Funding — have an agreement to share in the proceeds of legal recoveries by clients. All of this would appear to give investors in Asta, a publicly traded company based in Englewood Cliffs, N.J., a reason to cheer on Ms. Cohen, whose lawyers are scheduled to take a deposition from Mr. Cohen on Dec. 10. Balance Point, founded in 2009 by Stacey Napp after her own acrimonious divorce, signed a deal with Ms. Cohen in the summer of 2013 to provide Ms. Cohen with about $1.2 million to continue her litigation, said people briefed on the matter but not authorized to speak about a private transaction. While the specific terms of Balance Point’s arrangement with Ms. Cohen could not be determined, court filings in an unrelated lawsuit reveal it is common for Balance Point to get up to 25 percent of any legal recovery by a client in return for the financing provided. Balance Point is part of a niche business that provides financing in drawn-out matrimonial cases to litigants with wealthy spouses. Only a handful of companies provide such financing in the United States.
Uber Said Close to Raising Funding at Up to $40B Value (Bloomberg)
T. Rowe Price Group Inc. is in discussions to be a new investor, said the people, who asked not to be identified because the details are private. Existing investor Fidelity Investments is also set to participate in the funding, they said. Uber is raising at least $1 billion, the people said.
Shorting Chickens Becomes Hot Trade After Prices Surge (Bloomberg)
Short sellers have found a new asset to bet against: chickens. With no futures market to speculate on chicken-price movements, they’re turning to the equity market, borrowing record amounts of shares of two U.S. poultry producers that they in turn sell in anticipation of declines. The percentage of outstanding shares of Pilgrim’s Pride Corp. (PPC), the second-biggest U.S. chicken producer, that were sold short by investors has soared more than six-fold since Sept. 30, while the ratio for Sanderson Farms Inc. (SAFM) has almost doubled. The success, or failure, of the trade comes down largely on whether the eight-month surge in chicken, which has fattened producers’ profit margins, is over or not.
U.K. Banks Seen Facing Decades to Tackle `Toxic Culture’ (Bloomberg)
U.K. banks will need at least two decades to clean up a “toxic culture” that has cost them more than 38.5 billion pounds ($60 billion) in fines and compensation, Cass Business School said in a report. Banks were forced to make provisions of at least 27 billion pounds to compensate customers for improperly sold insurance products from 2010 to 2014, according to the report commissioned by New City Agenda. The mis-selling of interest-rate hedging products has cost lenders 4.1 billion pounds. “It has become clear that having an aggressive sales culture, which ripped-off customers, has cost banks dearly,” David Davis, a Conservative member of Parliament, said in the statement. “A toxic culture which was decades in the making will take a generation to turn around.”
Siberian police consider deputizing reindeer (AP)
Officials in northwest Siberia said police could soon be deputizing reindeer to help chase down criminals in the region. Irina Pimkina of the Yamalo-Nenets region’s Interior Ministry said police in the area, which is located in Russia’s Arctic tundra, often find themselves at a disadvantage when chasing down local criminals, who often employ reindeer as getaway rides. “Of course we have snowmobiles in service, but one should understand that a machine is a machine,” Pimkina told the Izvestia newspaper. “A snowmobile can break down or get stuck in the tundra, but the deer will run at all times.” The deer would join the animal ranks of about 150 donkeys and mules employed by the Russian Defense Ministry to serve in mountain brigades. The legislation governing the animals also allows for reindeer to be used for law-enforcement purposes. Read more »
FBI Files Say Hedge Fund Analyst Made Millions on Tips From Dell Insider (Bloomberg)
The FBI files spell it out: An analyst at Citadel LLC, the hedge fund with $23 billion in capital invested globally, told agents he made millions of dollars trading on information from a company insider. It was December 2011, and the Justice Department was deep into a seven-year investigation into illegal stock tips. As authorities homed in on people at several other hedge funds over leaks from a Dell Inc. employee, agents at the Federal Bureau of Investigation began questioning the Citadel analyst about the friendship he formed with the same Dell insider. In confidential FBI reports summarizing those interviews, agents recounted how the Citadel analyst received market-sensitive information from the Dell employee in 2008 and 2009. In one trade he told agents he made, the analyst bet against Dell after learning it would announce disappointing earnings, bringing in $5 million to $6 million when the company’s shares fell by more than 10 percent. He told agents he later discarded records. The analyst discussed helping the Dell employee hunt for a Wall Street job, the agents wrote. “It became an ‘I’ll scratch your back if you scratch mine’” relationship, they wrote in a summary of a Jan. 4, 2012, interview with the Citadel analyst.
Twitter’s CFO misfires with a private tweet (CNBC)
Anthony Noto, who joined the social network as its chief financial officer in July, appears to have posted a public tweet intended to be a private message, presumably intended for a fellow Twitter executive. “I still think we should buy them. He is on your schedule for Dec 15 or 16—we will need to sell him. I have a plan,” Noto tweeted. The post was quickly deleted but not before it was screengrabbed by some his savvy 8,700 followers. It is unclear at this time which company Noto was referring to as a potential Twitter acquisition. For what it’s worth, the last tweet favorited by Noto belongs to Snapchat CEO Evan Spiegel, who reportedly turned down a $3 billion cash offer from Facebook in 2013. It’s also worth noting that a handful of the accounts recently followed by Noto feature employees from a news startup called Mic.
New Jersey’s richest man plans to give billions back to investors (NYP)
Hedge fund titan David Tepper is having a tough year, but he’s still planning to return billions of dollars to his investors. Tepper, who is the richest person in New Jersey, may give $2 billion to $4 billion back to investors in his $20 billion Short Hills-based Appaloosa Management funds this year, a source close to the firm told The Post. The news was first reported by Institutional Investor’s Alpha. The givebacks are coming as Tepper’s Palomino hedge fund is down 2.3 percent for the year through October. It’s quite a comedown from last year, when Palomino gained 42 percent, making Tepper the highest-paid hedge fund manager in the world for the second year in a row. In 2013, the hedgie had a $3.5 billion payday, putting his net worth at $10 billion.
Citigroup ‘Idea Dinners’ Cited in Finra Fine Over Tips (Bloomberg)
At a July 2011 dinner for Citigroup Inc. (C) clients, a research analyst identified a stock to bet against. In his last research notes before that gathering, he upgraded the shares, advising investors to stick with them. The analyst was among several cited yesterday in an action by the Financial Industry Regulatory Authority, which fined Citigroup $15 million. The employee offered similar tips at six subsequent “idea dinners” on stocks that he had rated as hold or neutral, Finra said.
Russians dumping rubles for… Rolls Royces? (CNBC)
Even as Rolls Royce hits speed bumps in China, the ultra-luxury carmaker is breaking new sales records in Russia as consumers look to diversify away from the beleaguered ruble. “With the weak ruble, people are investing into real assets,” Torsten Müller-Ötvös, CEO of the BMW-owned British car brand told CNBC on Tuesday. “We’ve seen very good business this year; Russia is at new record levels.”
Girlfriend dumped with restraining order after a ‘girls weekend’ (NYP)
A Manhattan fashion consultant says she returned from a girls weekend in California to her boyfriend’s Hamptons mansion — only to be greeted by a process-server who slapped her with an order of protection. “I was 100 percent shocked,” a heartbroken Nicole Raef told The Post. “I was like, ‘I don’t understand, who breaks up with someone this way?’ ” Raef, 28, has been homeless ever since her boyfriend of five years abruptly threw her out of his $1.7 million Long Island summer home and his $6 million Manhattan town house. “Everything was fine when I left,” Raef said, adding that she had to pawn her diamond earrings to afford legal counsel. “We’d been arguing, but we’d worked things out,” the slender brunette said. But court papers filed by her boyfriend, hedge-fund-executive-turned-private-investor Brad Zipper tell a different story. Zipper, 50, former head of Zinc Capital Management, paints his decades-younger ex as an abusive, emotionally unstable stalker. In an application for a temporary restraining order, Zipper says he came home in December 2012 to find his oven on fire and Raef passed out in the guest room. “When she woke up, she was delirious and didn’t even remember driving and getting into an accident with my car that night,” the suit says…Raef’s attorney, Brett Kimmel, denied Zipper’s claims. “The allegations that are set forth in the pleadings are clearly embellished and to a large degree untrue,” he said. “This is a wealthy man breaking up with his girlfriend and doing it in a really untasteful way.” Read more »
Ed. note: This is a new weekly column by Elie Mystal, Managing Editor of Above the Law Redline, wrapping up the week that was in law and finance. Elie is not a practicing attorney, and anything he says that you listen to can and will be used against you.
Issue #1: How can you get a permit to do a damned illegal thing?
Bitcoins are a “real” commodity, so says the Commodity Futures Trading Commission. Commissioner Mark Wetjen “I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity, “I do believe we have the authority because if you think of any reasonable reading of our statute, bitcoin classifies as a commodity.”
Well maybe if Wetjen wishes really, really hard, Tinkerbell will spring to life and sprinkle enough regulatory pixie dust to give the CFTC the authority it believes it should have. Read more »