Opening Bell

Opening Bell: 04.30.14

Barclays Said to Name Bommensath to Oversee ‘Bad Bank’ (Bloomberg)
Barclays is planning to move its commodities division into a so-called bad bank of unwanted assets and units to be overseen by Eric Bommensath, according to a person familiar with the plan. Tom King, 53, co-head of the corporate and investment bank with Bommensath, will become its sole leader, the person said yesterday, asking not to be identified because the change hasn’t been made public. Bommensath will oversee businesses that the London-based firm previously designated as part of its “exit quadrant,” according to the person.

McGee Exiting Barclays Shows Lehman Legacy Fading Away (Bloomberg, related)
When Barclays Plc announced yesterday that McGee is stepping down from that role at the end of the month, it meant the London-based firm will lose a banker seen by U.S. colleagues as their advocate for risk, pay and aggressiveness. His departure is another step away from a pre-crisis Lehman culture whose competitiveness was written into the firm’s code of ethics. Almost six years after Barclays bought parts of the company, which filed the biggest bankruptcy in history, and following its own scandals from interest-rate rigging to selling insurance customers didn’t need, the lender is cutting jobs, rebuilding relationships with regulators and facing shareholder pressure to curb bonuses. “Barclays has to have its own identity and has to do its own thing, and I think it’s evolving to that now,” said American International Group Inc. General Counsel Tom Russo, a former Lehman vice chairman. “I think it’s becoming extraordinarily cost-conscious. It’s shrinking a bit.” McGee, 54, said in an e-mailed statement that he’s leaving because the job has changed. “My focus has always been on clients, but given the need for Barclays leadership to focus on regulatory issues for the foreseeable future, I have decided that it is time for me to move on to new challenges,” he said.

Third Point Asks Judge To Delay Sotheby’s Annual Meeting (Law360)
Third Point LLC asked a Delaware Chancery judge Tuesday to postpone Sotheby’s upcoming shareholder meeting, saying the auction house is improperly using a poison pill to thwart activist investor Daniel Loeb’s proxy fight for three board seats.

Twitter’s Stock Sinks Despite Growth in Revenue, Users (WSJ)
While Twitter has proven to be a powerful communications tool for celebrities, activists, marketers and journalists, it hasn’t caught on with mainstream users. Facebook, meanwhile, has become a required place to share photos and life’s daily happenings. Twitter reported Tuesday it added 14 million monthly active users in the first quarter, up 5.8% to 255 million from the previous three months. That growth was better than in the fourth quarter but failed to impress some analysts. Today one in five Internet users in the U.S. log into to Twitter once a month, and its global user base is about one-fifth the size of Facebook’s.

‘Dark Wallet’ for Managing Bitcoin Arrives This Week (Digits)
Last year, the Journal told readers about Cody Wilson’s efforts to take the virtual currency off the grid through a project called Dark Wallet, the 26-year-old’s latest effort to use technology to sidestep the government. Mr. Wilson is most famous for creating the first working gun made by a 3-D printer. After months of programming, Wilson and his partner, British anarchist Amir Taaki, also 26, are releasing an early version of the software for free download. It will work as an add-on for Google’s Chrome browser….Among other things, Dark Wallet is designed to encrypt bitcoins as they’re spent, making it difficult to see who is buying what. Think of it as throwing a ball into a spinning lottery tumbler and picking out a different ball. If more people use Dark Wallet, the theory goes, more people put balls in the lottery tumbler and make it harder to determine which belongs to whom.

Cronut Chef Creates the Waffogato (Time)
Dominique Ansel, creator of the infamous cronut, is at it again. And this time, he’s taking on the waffle. Well, sort of. The New York-based chef has created a waffle made out of ice cream and topped with a maple syrup espresso, which will make its debut at a hunger relief fundraiser in New York City Monday night. Ansel’s waffogato, a breakfast-themed take on the Italian dessert of ice cream topped with espresso, will be available in his Soho bakery starting May 9. The vanilla ice cream “waffle” is laced with Belgium waffle bits and set in a cup where warm, maple syrup espresso is poured on top. “It’s a little like a milkshake at the end,” Ansel told the Wall Street Journal. If history tells us anything, it’ll likely spark flocks of New Yorkers and tourists to stand in line for hours for the latest Ansel concoction, much like the waffogato’s predecessor the cronut did. Not even a mouse infestation could dim the hype over the part-donut, part-croissant pastry. The waffogato could even spawn another underground pastry economy, though that could be tricky logistically—the chef told the Wall Street Journal that his latest creation is best eaten right away. Read more »

Opening Bell: 04.29.14

Deutsche Bank Profit Slides 34% on Debt Trading Slump (Bloomberg)
Net income dropped 34 percent to 1.08 billion euros ($1.5 billion) in the three months through March from a year earlier, the Frankfurt-based company said in a statement on its website today. That compared with the 1.01 billion-euro average of 10 analyst estimates compiled by Bloomberg. Revenue from trading fixed income, currencies and commodities fell 10 percent to 2.43 billion euros, beating the 2.12 billion euros average of nine estimates.

Herbalife plays hardball with buybacks (NYP)
Herbalife, the controversial nutritional supplements company, is pulling out all the stops to buy back its shares as the cost of its battle with activist Bill Ackman and multiple regulators continues to mount. While reporting record quarterly “adjusted” earnings on Monday, the company said it has abolished its $1.20 a share annual dividend and will instead plow that cash into a stock buyback plan. The plan allows it to more aggressively repurchase stock even in the face of civil and criminal investigations regarding allegations it is a pyramid scheme…The implementation of a special trading plan allows the Los Angeles company to buy back stock under a pre-arranged program even if it is in the possession of material nonpublic information and would normally be prohibited from trading. Herbalife has been aggressively buying back stock under the plan, spending $255 million in April, it said. Another $60 million will be spent in the next two days. Herbalife spent $685.8 million of a $1.1 billion convert offering in February to buy back shares, boosting its long-term debt to $1.85 billion.

Disney Considered Buying BuzzFeed, but Balked at $1 Billion Price (Dealbook)
As part of a routine effort to identify acquisition targets, Disney last year zeroed in on BuzzFeed, the fast-growing digital media company, but Disney’s interest quickly dissipated when BuzzFeed valued itself at nearly $1 billion, according to a person with direct knowledge of the talks.

Bitcoin traders settle class actions over failed Mt Gox exchange (Reuters)
The class action plaintiffs agreed to support a plan by Sunlot Holdings to buy the shuttered exchange and accept their share of bitcoins still held by Mt. Gox, according to a statement and court filings. Mt. Gox filed for bankruptcy in Japan and the United States earlier this year after saying it lost some 850,000 bitcoins – worth more than $400 million – in a hacking attack. It subsequently said it found 200,000 bit coins.

Man Who Allegedly Robbed Store With Potato Apprehended By Cops (HP)
…34-year-old Gary Deming of Cranston was arrested on robbery charges. Authorities say he pretended he had a gun when he demanded money from a convenience store and dry cleaner April 21. The convenience store manager chased him off with a baseball bat. A dry cleaner employee gave him a fake $20 from a decoy register. The station reports Deming is also accused of breaking into his sister’s home on the same day as the alleged potato incidents. She told police he took a purse, debit card and $100 in cash. Read more »

Opening Bell: 04.28.14

Ackman Documentary Stars Alleged Herbalife Victims (NYP)
In his quest to bring down Herbalife, activist investor Bill Ackman will publicly showcase a documentary about former Herbalife distributors who say they were defrauded by the company. Ackman, who has bet more than $1 billion that Herbalife’s stock will collapse, is offering the film as his latest evidence that the controversial nutrition products company is a pyramid scheme. He said his Pershing Square hedge fund commissioned the 15-minute documentary last year to get alleged victims before regulators and the public. Herbalife has denied it is a pyramid scheme. The documentary will be shown at an event Friday in New York City. Members of the press, government, community and consumer organizations are invited to attend the showing, which will be simultaneously webcast. The specific time and place is undisclosed to prevent any interference at the actual event, according to Ackman.

Treasuries Irresistible to America’s Banks Awash in Record Cash (Bloomberg)
After culling Treasuries and bonds issued by federal agencies last year for the first time since 2007, commercial lenders such as Bank of America Corp. (BAC) have boosted their holdings every month this year, Federal Reserve data compiled by Bloomberg show. Banks now own $1.85 trillion of the debt, within 2 percent of the record amount held at the end of 2012.

Finra investigating E*Trade for potentially rigged markets (NYP)
Finra opened the probe well before the latest public flare-up over high-frequency trading, or HFT, but the investigation hits many of the same hot buttons. Finra is determined to find out how E*Trade has priced and electronically routed customer orders to G1 Execution Services, a business it bought for a reported $173 million and sold this year to Susquehanna for about $75 million. “Finra notified E*Trade Securities LLC and G1 Execution Services LLC that it is conducting a probe of both firms’ routing practices,” E*Trade disclosed in a footnote in its latest 10-K annual regulatory filing.

Happy Birthday To Greenwich’s Richard ‘Dick’ Severin Fuld Jr. (GDV)
Fuld, who has owned a home in Greenwich, turn[ed] 68 on Saturday. The banker was born April 26, 1946, in New York City. His first career as an Air Force pilot came to an end when he got into a fistfight with a commanding officer. He then began his career with Lehman Brothers in 1969, as a commercial paper trader and rose rapidly.

Flight crews can’t stop taking mile-high selfies (NYP)
Sexy flight attendants across the world have started an underground network of mile-high selfies that they post on Instagram. In one photo, five beautiful Emirates Airlines attendants are seen in uniform draped over each other inside an aircraft in the style of a Vanity Fair spread. “Best crew ever #galley #cabincrew #airhostess #flightattendant #emiratescrew #emiratescabincrew #crewlife #flight” reads the picture’s tag line. Another selfie features an exotic-looking airline hostess posing in a crew locker room, wearing a pilot’s hat and with her lips puckered, with the tagline “#flywithme.” Some flight attendants say the photos create camaraderie and allow them to keep up with one another. “Aviation is a very close-knit community,” said flight attendant and “Rants of a Sassy Stew” blogger Shawn Kathleen, who doesn’t use her last name. “We get each other, because we’re living the same lifestyle.” Kathleen said she’s in the process of trademarking the phrase #crewlife. She’s already encouraged other flight attendants to vent their frustrations at passengers who behave badly by posting embarrassing photos of the fliers with the hashtag #passengershaming. Read more »

Opening Bell: 04.24.14

‘Flash Boys’ Resonates as Survey Finds High-Frequency Concerns (Bloomberg)
More than two-thirds of financial industry participants, 70 percent, say the U.S. equity markets aren’t fair for all, according to a survey conducted by ConvergEx Group LLC, which provides brokerage and trading-related services. Just over half, 51 percent, also said high-frequency trading is harmful or very harmful.

Facebook CFO Ebersman to Step Down Two Years After IPO (Digits)
Mr. Ebersman is leaving June 1 and being replaced by David Wehner, who joined Facebook in 2012 from Zynga to become the company’s vice president of corporate finance and business planning. Mr. Ebersman joined Facebook in 2009, leading the company into its initial public offering in May 2012. The former Genentech finance chief says he is returning back to the healthcare industry, without disclosing where.

Ratings Firms Ride Bond Resurgence (WSJ)
Six years after getting a failing grade for their role in the financial crisis, credit-rating firms are at the top of the class. Riding a global bond boom, the two biggest U.S. firms, Standard & Poor’s Ratings Services and Moody’s Investors Service, this month are expected to post record first-quarter profits. Fitch Ratings said in its annual filing this month that 2013 was “one of its best years ever.”

Investors Embrace ‘Catastrophe Bonds’ (WSJ)
With the U.S. hurricane season about a month away, insurers are issuing “catastrophe bonds” at the fastest clip since before the financial crisis. Insurers sell the bonds to help cover potential claims from hurricanes, tornadoes, earthquakes and other major insured risks. While losses on so-called cat bonds have been rare over the years, investors can forfeit both interest payments and their principal if disaster costs exceed designated levels, which gives insurers the right to tap the funds. The bonds have floating interest rates and are usually paid off upon maturity in three or four years. Cat-bond issuance in the first quarter more than doubled from the year-earlier period, to $1.2 billion, and second-quarter issuance is expected to hit an all-time high above $3.5 billion, according to Willis Capital Markets & Advisory. More than $2 billion of deals have closed or been announced this quarter, Willis said.

America’s First Cat Café is Popping Up in NYC This Week (Eater)
Pet food brand Purina ONE is opening a pop-up cat café at 168 Bowery this Thursday. For those unfamiliar, a cat café is a coffee shop populated with cats for customers to play with. It’s all the rage in Japan and Europe, and enterprising cat-lovers in San Francisco, Oakland, Portland, LA, Vancouver, and Toronto are racing to open cafés of their own. But with this pop-up, New York will become the very first North American city to actually get a cat café. Read more »

Opening Bell: 04.23.14

Judges Consider What Defines Insider Trading (WSJ)
Federal prosecutors were peppered with tough questions Tuesday on the legal underpinnings of their near-perfect record in insider-trading cases, raising the prospect that some convictions could be overturned. In an hourlong hearing in Manhattan, judges of the U.S. Court of Appeals for the Second Circuit signaled that federal prosecutors may have taken too broad a view of insider trading, saying Wall Street needs more of a “bright line” about what constitutes a crime. At issue is whether a trader, to be guilty of insider trading, must have known a tip was illegally disclosed in exchange for a reward. Prosecutors have argued they need only show that people who used insider information knew it had been disclosed in breach of a fiduciary duty.

Numericable Set to Issue Record Junk Bond (WSJ)
A French cable operator is preparing what could be the largest junk-bond sale in history—a sign of investors’ ravenous appetite for risk in an era of low rates and a mark of the profound shift in bond financing on a continent that had long borrowed heavily from its banks. Bankers working on the deal say Numericable Group SA NUM.FR +3.93% was expected to raise the equivalent of €8.4 billion ($11.6 billion) from the bond sale Wednesday, about €2 billion more than initially planned. The Numericable deal would clobber the current record junk-bond sale, the $6.5 billion issue last year by U.S. telecommunications provider Sprint Corp. So big is the Numericable offering that it was being parceled into several chunks and issued in both dollars and euros. According to a banker working on the deal, the chunks will yield between about 5% and 6.5%.

Flurry of Allergan Trading Preceded Offer (WSJ)
Investors made outsize bets on Allergan Inc. stock in the 10 days during which activist hedge-fund manager William Ackman was privately accumulating a stake in the Botox maker, according to a Wall Street Journal analysis. Mr. Ackman’s Pershing Square Capital Management LP said Monday after the close of trading that it had bought a 9.7% stake in Allergan and had joined with Valeant Pharmaceuticals International Inc. to buy Allergan. Mr. Ackman and Valeant unveiled the offer, valued at roughly $46 billion, on Tuesday, and Allergan’s stock surged 15%. Even after stripping out Mr. Ackman’s buying, the volume of stock trading in Allergan during the 10-day period before Monday’s announcement was 86% higher than its average over the previous year, according to the Journal analysis, based on trading data provided by research firm S&P Capital IQ. There is no indication investors were tipped off about Pershing’s and Valeant’s offer. And other traders could have bought based on the higher volume. But such a significant surge in trading suggests that information about the potential buyout bid could have leaked to other investors, analysts said.

Russian bank launches post-Crimea bond (FT)
A Russian bank in the oil-rich region of Tatarstan has become the country’s first lender to issue a dollar-denominated bond since Moscow’s official annexation of Crimea and the subsequent tension with western governments. Tatfondbank, which has branches across Russia, raised $70m on Tuesday through a three-year bond priced to yield 11 per cent for investors. The issue, which was privately placed, was led by Bank of America Merrill Lynch along with two Russian banks, Region Broker Company and Otkritie Capital, part of Nomos Bank. According to bankers the bond issue could indicate a thawing in Russia’s debt capital markets, which have been largely put on hold as global political discord over Ukraine escalates. Nick Darrant, head of emerging markets syndicate at BNP Paribas, said the deal showed an uptick in demand for Russian debt remained in spite of the political risks.

Einhorn Shorting Tech as ‘Cool Kid’ Stocks Show Bubble (Bloomberg, earlier)
“There is a clear consensus that we are witnessing our second tech bubble in 15 years,” the New York-based firm said in a quarterly letter to clients.

Florida Man Catches 800-Pound Shark, Fries It Up (HP)
Joey Polk landed an 805-pound mako shark while fishing off the Florida panhandle last Tuesday. Video of the epic haul captured the moment Polk and his cousins pulled the giant fish ashore — and then took the remains home to eat. The 29-year-old, who lives in Milton, Fla., told WKRG that he’d prefer to keep a low profile, and doesn’t want any unnecessary attention paid to land-based shark fishing…”The funny thing is, as I left the house to go out that night, I kissed my son and said ‘Daddy’s gonna catch up a big, big fish tonight,’ but I didn’t think it would be this big,” Polk said, according to SFGate. Polk said he doesn’t want people to get the impression that gulf waters are teeming with sharks, and he doesn’t want people to go rushing out to the beach to try and land the big fish either. He said it’s all about the sport. According to Polk, the majority of the sharks he pulls in get tagged and released. But after an exhausting, hour-long fight, Polk said that the 11-foot mako shark couldn’t be saved. “We release about 98% of what we catch… we only bring in the ones too injured to swim away,” Polk said, according to SFGate. “We tried to revive the fish and send him back out, but he was too worn out to swim.” The website reports that Polk butchered the shark and cooked it for his community. He said it fed about 250 people. Read more »

Opening Bell: 04.22.14

Williams Urges Fed to Avoid Stoking Risk as It Boosts Jobs (Bloomberg)
“We’re exactly on the right track” with current policy, Williams said in an interview yesterday in San Francisco, predicting unemployment will fall to 5.5 percent by the end of next year and inflation will accelerate to about 1.7 percent. Trying to achieve the Fed’s goals sooner “would take policy actions that might have more negative effects,” he said.

Dawn raid makes comeback via activist drone strike (Reuters)
Remember the dawn raid, when a would-be acquirer built up a stake before the target realized it was under attack? Activist investor Bill Ackman has come up with a kind of drone strike version. His Pershing Square Capital Management hedge fund and Valeant Pharmaceuticals have teamed up to grab a potential 9.7 percent stake in Allergan, with a hostile takeover by Valeant ready for deployment. The acquisitive Valeant has reasons to be receptive to such an arrangement. For one thing, it’s essentially the creation of an activist hedge fund, ValueAct Capital, which set it on the path of serial dealmaking. Slashing research and development costs and applying its low tax rate to acquired businesses has served investors well. Its stock is up more than tenfold since it started buying rivals in 2008. The prospect of another deal kicked its shares 10 percent higher after regular market hours on Monday, taking its market capitalization up to $46 billion.

HK regulator reprimands, fines RBS over emerging-markets rates trades (Reuters)
Hong Kong’s Securities and Futures Commission (SFC) said on Tuesday it reprimanded Royal Bank of Scotland (RBS.L) for internal control failures, fining the bank HK$6 million ($773,800). The SFC said in a statement RBS failed to detect and prevent unauthorized trades in its emerging markets rates business in the city in 2011, following the discovery of unauthorized trades by former trader Shirlina Tsang. Tsang was sentenced last year to 50 months in jail after pleading guilty to fraud after was she caught falsifying records of her trades, Reuters previously reported.

Worker sends 1,000 ducklings to boss’s home in wages dispute (Metro)
Builder Chiu Xiang arranged for the 1,130 live ducklings to be dropped in the home of his employer, Hung Bin, in a dispute over wages. The 60-year-old, who worked for Bin for three years, said he was owed £300 in unpaid wages after quitting his job in China’s Sichuan province last year, according to the Shanghaiist. ‘It was all he deserved,’ he said. ‘I hope the ducks drove him quackers.’ Xiang organised for a contact who runs a poultry business to drop the ducks off, telling him they would be paid for on delivery. Police were called to the scene after Bin refused to pay for the duck delivery. ‘It was drastic but necessary,’ said Xiang, who has been promised a negotiated settlement with the local labour authorities. Read more »

Opening Bell: 04.21.14

Barclays to Exit Most Commodities Trading in Bid to Bolster Profit (WSJ)
The U.K. bank will pull back from trading in base metals, energy and agricultural products and fold its precious metals business into its currency trading unit, people familiar with the plans said Monday. The move comes as Barclays prepares to tell investors on May 8 how it will reshape its investment bank, where the commodities business is housed, to adapt to costly new regulations and a slowdown in some business areas.

SEC Weighs Making Brokers Disclose Where Trades Are Sent (Bloomberg)
The proposal could give investors more insight into whether they are getting the best price when they buy and sell large numbers of shares, according to three people familiar with the matter. Brokers entrusted with orders in the U.S. stock market can choose from dozens of exchanges and private venues. Some money managers such as T. Rowe Price Group Inc. (TROW) have told regulators that incentives offered by exchanges for attracting orders can put a broker’s financial interest at odds with the customer’s.

TPG-Led Group Closes $450 Million Investment in Airbnb (WSJ)
A group led by private-equity firm TPG has finalized an agreement to invest more than $450 million in Airbnb Inc., valuing the home-rental site at $10 billion, according to people familiar with the situation. The funding round makes Airbnb one of the world’s most valuable startups, matching investors’ price tags for file-storage company Dropbox Inc. and Chinese smartphone maker Xiaomi Inc. Airbnb, which lets people rent their homes to travelers, is also now valued higher than large publicly traded hotel chains Wyndham Worldwide Corp. and Hyatt Hotels.

Ice Cream Turf War Breaks Out On Easter (Fox2)
A ice cream truck turf war broke out Easter morning in north St. Louis County on Parker Road, near Highway 367. Just after 1 pm, two ice cream trucks got into a dust up, when the driver of one truck cut off another truck, threatening the driver of the first truck. The driver of the second truck then proceeded to damage the first truck, music siren and merchandise. The driver of the damage truck says he’s had the same route for seven years and the second driver wanted to take over his route. But the real kicker here is that both drivers work for the same company. The victim says he plans on keeping his route, and that other driver may lose his job. Read more »