Prudential Equity Out

prudentialbreakingup.jpgPrudential has confirmed today that it is shutting down its equity operations because the unit’s small size was not conducive to long-term success in the market. The division’s revenue for last year, $260 million, represented a negligible fraction of overall revenue, which was $32.49 billion (Prudential Equity Group’s profit before taxes was $34 million). The conglomerate had apparently been shopping the unit to potential buyers but no deals came through. The shuttering of the stock research and sales business means that about 420 people will lose their jobs. Severance for workers will reportedly come out to $75 million, with VP level staff receiving two months salary, period. Shares of Prudential Financial rose 43 cents to $101 in premarket trading Wednesday (after closing Tuesday at $100.57).
Earlier: Rumor Mill: Breaking Off A Piece Of The Rock
Prudential Shuts Equity Division [Houston Chronicle]

Rumor Mill: Breaking Off A Piece Of The Rock

prudentialbreakingup.jpgWhispers around Wall Street today claim that Prudential, the insurance and financial services company, may spin-off its equity research, sales and trading unit.
“It’s definitely possible that they are selling the group,” a former Prudential Financial employee told DealBreaker. “But compared to the over all size of Mother Pru, the group is tiny. The stock move is surprising.”
On Monday, Mark DeCambre reported on that Prudential Financial was “fielding offers” for the Prudential Equity Group, which handles equity research, sales and trading.
“The equity unit, which is small relative to other shops such as Goldman Sachs and Merrill Lynch, consists of some 35 senior analysts but also has around 80 traders,” DeCambre wrote. “Prudential has been trying to offload the unit as the market for research and trading has become more competitive and less lucrative.”
Today the rumor was everywhere on Wall Street. Several finance professionals told DealBreaker they had heard of the upcoming sale but none could confirm it or name the buyer. At least a one cited a rumor that Prudential might simply shut down the group.
“They wouldn’t make sense as a stand along shop,” DealBreaker’s source said. “But as part of a larger operation, filling-in gaps, they would make sense. They have lots of big league guys. Sales and trading. Good analysts.”
One challenge faced by Prudential’s equity group in recent years has been the focus on large cap stocks in a period when many clients demand analysis on small cap, mid cap and growth stocks, the source said.
“Pru had a great year and a half when they were able to sell themselves as a clean, pure research shop. A Sanford Bernstein look alike,” he said. “But the scandals of Citi and CSFB have faded from memory. That model isn’t driving things. They’ve lost some big analysts.”
Prudential Shopping Equity Unit []
Prudential jumps after report revives break-up talk[Reuters]
Completely Unrelated: The other Pru may break-up also. [Daily Telegraph]

Prudential Settles For $600 Million

prudential.jpgPrudential is the latest financial institution to settle charges brought by the SEC that it had facilitated improper trading of mutual funds. The cost to Prudential is $600M, which seems like a lot of money but it really would have to be measured against the gains and potential gains of the alleged conduct in order to be properly evaluated. You see, this is how is allegedly worked—Prudential brokers would allow favored clients, mostly hedge funds, to trade on news breaking after 4 PM. These late trades gave favored investors a knowledge edge that other investors lacked—think of it like insider trading via time travel. Two Prudential brokers pleaded guilty to criminal charges last year.

Prudential to pay $600 mln, resolve charges-source