Assuming the positions have not already been filled, they’ve got openings in Boston and New York, if you know anyone looking to roll their sleeves up and get to work. Read more »
Sources: Steve Cohen Wasn’t Completely Enamored With Attempts To Ban Him From Managing Client Money For LifeBy Bess Levin
The SEC’s tack angered the SAC chief, the people close to the firm said. The billionaire hedge-fund manager has been discussing plans to move forward with his business, even as the government has stepped up its scrutiny…Even so, Mr. Cohen has said privately that he believes he can raise new money from wealthy individuals, the people said. While institutions have pulled money, some wealthy individual SAC clients have stuck by the firm, according to people with knowledge of the matter. [WSJ]
SAC Capital Accuses Securities and Exchange Commission Of Failing To Understand The Meaning Of ‘Exceptional Supervisory Structure’By Bess Levin
Sayeth SAC: Read more »
So that’s something. Read more »
June performance (so far). Read more »
Starboard Value’s letter to Smithfield Foods arguing that Smithfield is selling itself too cheaply to Shuanghui International makes for tough reading if you think pigs are cute. The 16-page letter does a pretty detailed sum-of-the-parts valuation of Smithfield at, like, a pig-by-pig level, and it doesn’t end well for the pigs. Sum-of-the-parts value has a disturbingly literal meaning, for them.
How did this letter come about? I imagine it as something like this:
- Earlier this year, Starboard analyst recommends Smithfield on the basis of a long well-reasoned report about how it’d be worth 2x its current price if it were broken up.
- Portfolio manager is persuaded and buys a chunk of shares starting in March, at an average price of around $27, planning to mount an activist campaign to break up the company.
- Smithfield announces merger at $34 a share on May 29.
- Starboard makes several million dollars on paper.
- Starboard celebrates, congratulates analyst, etc.
- Some spoilsport interrupts celebration saying, “well, but really the thesis was that Smithfield could break itself up and we’d make even more money.”
- “Really, analyst, this counts as a loss.”
- “Go back to your desk and repurpose your original report into a letter that we can mail to Smithfield.”1
Here’s a fun Libor lawsuit: the ghost of problematic former hedge fund FrontPoint is suing the Libor banks for (1) selling FrontPoint some interest-rate swaps and (2) manipulating Libor in a way that hosed FrontPoint on those swaps. Here is the complaint and here is Alison Frankel on the legal issues, which are interesting and which we can talk about a little below.1
Up here let’s talk about the trades that FrontPoint (and Salix Capital, which now owns these claims) is suing over. They’re interest rate swaps, of course, where FrontPoint received Libor, and where Libor was systematically manipulated lower by banks looking to enhance confidence in themselves by showing lower funding costs. But those swaps were part of a larger negative-basis package trade where (1) FrontPoint bought bonds (funded at a spread to Fed Funds), (2) FrontPoint bought CDS from a bank to hedge credit, and (3) FrontPoint entered into a swap with the bank to hedge interest rates. Schematically, when everything cancels, it looks like this:
If you asked FrontPoint what the trade was they might say “we are betting that the negative basis in these bonds will converge, making the bonds worth more relative to the CDS,” or alternately, that they would just ride the trade to maturity, getting paid that negative basis, and “earn a risk-free return by buying and selling the same credit exposure via alternative instruments in different markets.” That’s what the trade is primarily about: that orange thing in the lower-right-hand corner labeled “(Basis).” Read more »