Hedge Funds
January performance. Continue reading »
January performance means a lotta salsa victory dancing going on at the office today. Continue reading »
January performance. Continue reading »
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Hedge Funds
Steve: Remember That Not Getting An MLB Team Can Sometimes Be A Wonderful Stroke Of Luck
By Bess Levin
Over the weekend, the LA Times reported that a group headed by Steve Cohen was among those that advanced to the second round of bidding for the Los Angeles Dodgers. Mark Cuban, “veteran baseball executive” Dennis Gilbert, and former Dodgers players Steve Garvey and Orel Hershiser are out; at the top of Cohen’s elimination list remain Magic Johnson and Joe Torre. Obviously, we have no idea whether or not the SAC Capital manager will emerge victorious. Either way, though, something about all this has been troubling us: namely how acquiring a baseball team figures into SC’s long-term plans. Continue reading »
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Hedge Funds
It’s Also Not Entirely Clear To David Einhorn, Or Us, Why Punch Isn’t In Any Trouble Here
By Matt Levine
On further inspection Greenlight Capital’s unfortunate relations with Punch Taverns went down more or less as I had thought: they had an un-wall-crossed conversation with management that David Einhorn took to be a sign to sell, and sold without ever agreeing to keep any information confidential. One key and sort of amusing difference – if you believe Greenlight’s explanation – is that, contrary to what I and the FSA thought, the sell signal in Einhorn’s mind wasn’t “Punch is going to raise equity.” It was “the CEO of this company thinks it’s a piece of crap.” Which I guess is also material nonpublic information.
Anyway here is something Einhorn said on his call yesterday:
The Decision Notice … doesn’t seem object to my having sold the stock. The problem is that I didn’t get permission first. “It was a serious error of judgement on Mr Einhorn’s part to make the decision after the Punch Call to sell Greenlight’s shares in Punch without first seeking any compliance or legal advice despite the ready availability of such resources within Greenlight.” It was already obvious to me that I was clear to trade. I have no idea why a compliance officer would have reached a different conclusion. It is highly unlikely that asking would have led to a decision to restrict ourselves.
Here is an alternative view: Continue reading »
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Hedge Funds
It May Surprise You To Learn That Reasons For Greenlight’s “Punch” Fine Are Not Entirely Clear To Me Either
By Matt Levine
Remember how insider trading is trading on material nonpublic information? Only how it’s not? Apparently it is in England! Someone found that out today.
I know, I’m soft on insider trading but hear me out. This is actually kind of screwed up.
First, a story. I used to work in a business that raised money for companies. Often when companies needed to raise money it was to do things like stave off rapidly impending doom, and the company would come to its bankers and ask “so, um, how’s that story going to play in the market?” And you’d answer something like “I don’t know but probably shitty?” And a way to make everyone feel better was a wall-crossed deal, in which the bank calls a few big potential buyers and says “would you buy this thing? at what price?” with the goal being to get the deal mostly done without freaking out the market – or, if that failed, to cancel the deal and move on to plan B also without freaking out the market.
Now in order to do this you needed to “wall cross” the potential investors by getting them to agree not to talk about the offering, or trade in the company’s stock, until the offering became public or was abandoned. Why? Two reasons:
(1) A thing called Regulation FD makes it illegal for companies to tell some investors material things unless they either disclose it to everyone or get the investors to agree to keep it confidential and not trade on it.
(2) Also important! You did this whole wall-cross to avoid announcing your deal and freaking everybody out so they sell your stock. If you don’t get investors to agree not to trade, then they’ll probably sell your stock, so you’ve accomplished nothing except breaking the law a bit.
Now getting them to agree not to trade has a certain chicken-and-egg quality because getting a call from a bank saying “we need to lock you up on company X” is never a good sign (maybe rare exceptions). So the call would go like this: Continue reading »
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Hedge Funds
Greenlight Capital Fined Over ‘Punch’ Trades For Reasons Not Entirely Clearly Clear To Greenlight
By Bess Levin
According to the FSA, which imposed the £7.2 million fine for “inadvertently engaging in market abuse in connection with trading of Punch Taverns…the market abuse was not deliberate or reckless. Mr. Einhorn did not believe that the information that he had received was inside information and he did not intend to commit market abuse.” Sayeth Einhorn: Continue reading »
Diamondback’s founders, Richard Schimel and Larry Sapanski, said Monday in a letter to clients that the investment firm’s external lawyers had conducted an “extensive review” of trading records and communications. As part of the review, lawyers with Wilmer Cutler Pickering Hale & Dorr LLP sifted through millions of emails and instant messages, analyzed thousands of trades, and made eight presentations to federal authorities regarding their findings between December 2010 and this month, according to a person familiar with the matter. The review “found no evidence establishing improper trading by any other Diamondback employee,” Mr. Schimel and Mr. Sapanski said in the letter, [announcing its $9 million settlement with the SEC]. [WSJ]
It probably speaks well of the overall state of human rights in Europe that the European Court of Human Rights devotes a lot of its time to compelling moral issues like George Soros’s insider trading conviction. (Fine, there’s some torture too.) But how good is this:
Hedge funds have been known to use hardball tactics to make money. Now they have come up with a new one: suing Greece in a human rights court to make good on its bond payments. The novel approach would have the funds arguing in the European Court of Human Rights that Greece had violated bondholder rights, though that could be a multiyear project with no guarantee of a payoff. And it would not be likely to produce sympathy for these funds, which many blame for the lack of progress so far in the negotiations over restructuring Greece’s debts.
You … you think? You think that might look bad? Hmm.
More specifically the potential human rights violation here is the retroactive introduction of a collective action clause into the Greek-law bonds, which represent some 90% of the outstanding Greek debt. The idea here is along the lines of add CAC, scrape together a majority of the bondholders to agree to the exchange, and then force the holdouts to exchange on the same terms. Because Greece’s bonds do not currently have a CAC, people who bought the bonds would understandably feel a bit miffed to have one added retroactively, and some of them might replace the words “feel a bit miffed” with the words “have their human rights violated.” At the very least, though, retroactively and unilaterally adding material terms to the debt agreements seems pretty shady.
But one can have a little bit of perspective on this. I think there are about four things that Greece could do with its Greek-law bonds: Continue reading »
So hard for it, honey. (So you better treat him right, 2012.) Continue reading »
