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Opening Bell: 2.24.21

Opening Bell: 2.24.21

Irrational Lucidity; Carlyle eyes big payday; GameStop CFO gets one; hedge funds shake out of Alibaba; and more!

Jzh2074, CC BY-SA 4.0 <https://creativecommons.org/licenses/by-sa/4.0>, via Wikimedia Commons

Irrational Lucidity; Carlyle eyes big payday; GameStop CFO gets one; hedge funds shake out of Alibaba; and more!

Nothing Lucid About a $57 Billion Valuation for an Electric-Vehicle Startup [WSJ]
As the deal allocated CCIV shareholders 16.1% of Lucid’s equity, the implied market value of the combined companies is now roughly $57 billion—even excluding the impact of shares and warrants held by [founder Michael] Klein and his team that are due to vest…. But the company also cited a valuation of $24 billion. This is because the institutional investors agreed to buy into CCIV at $15 a share—a 50% premium to its net asset value but far below its current share price…. Even if we assume the company is something of a new Tesla, and that EVs rapidly replace conventional ones, plenty of questions remain. How successful will Detroit be in fighting back against Californian upstarts? Will EVs achieve better returns on capital than conventional cars, justifying higher valuations? How will manufacturers adapt to future breakthroughs in battery technology?

Carlyle’s Lee Aims to Raise $130 Billion While ‘Thinking Bigger’ [Bloomberg]
That money is expected to be drawn from existing groups like global credit and private equity, which now include bets in real estate and natural resources. The firm’s last buyout fund was its biggest ever, at $18.5 billion. Carlyle is expected to begin raising money for a new flagship buyout fund this year…. But senior leaders at the Washington-based alternative asset manager see even more opportunity to raise cash by bringing in new products and expanding strategies in insurance and infrastructure.

GameStop’s Short-Lived CFO to Leave With $30 Million Package [Bloomberg]
Jim Bell, the GameStop Corp. finance chief who is being pushed out after less than two years on the job… could earn millions more from equity in coming years if activist investor Ryan Cohen can pull off a turnaround of the video-game retailer…. Cohen, the billionaire co-founder of pet-supply company Chewy, has pushed GameStop to rethink its business and compete with Amazon.com Inc. more directly…. The company is now seeking a finance chief who is more in line with that vision….

Clearinghouse Urges Faster Trade Settlement Amid GameStop Scrutiny [WSJ]
The Depository Trust & Clearing Corp. said in a report on Wednesday that Wall Street should speed up the time it takes to settle securities trades to one day from two, and it called for a broad effort by the industry and regulators to achieve that goal by 2023…. The DTCC said shortening the settlement circle by one day would lead to significant savings among brokerages since they wouldn’t need to post as much margin. The largest component of brokers’ NSCC margin requirements, which is determined by a measure of volatility, would drop by 41%, the report found.

Alibaba, Once a Hedge Fund Darling, Dumped By Point72, Hillhouse [Bloomberg]
Investors from hedge fund titans such as Point72 Asset Management and Moore Capital Management to Canadian and U.S. pension funds dumped 101 million of Alibaba’s American depositary receipts in the fourth quarter, cutting the market value of their holdings by $89 billion, according to filing data. It was the biggest investment reduction among U.S. traded companies, more than three times the second-most sold stock, Salesforce.com Inc.... Alibaba’s shares, which are traded on the New York Stock Exchange, have slumped about 18% since November, when regulators in Beijing halted the $35 billion initial public offering of Alibaba’s affiliate Ant Group at the last minute….
Steve Cohen’s Point72 dumped all its $413 million in holdings last quarter fourth quarter. Louis Bacon’s Moore Capital slashed its holdings by 99%, while Dan Loeb’s Third Point cut its stake by 45%.... Izzy Englander’s Millennium Management LLC was among a minority group of investors who scooped up Alibaba, counting it as its sixth-largest holdings.

Trader’s Case Halted as U.K. Judge Thwarts Tax-Scandal Probe [Bloomberg]
“This case represents a serious rap over the knuckles” for the FCA’s enforcement division, said Claire Cross, a lawyer at Corker Binning, who wasn’t involved in the case.
“The case also exposes what appears to be a startling lack of energy and motivation to investigate what amounts to the biggest financial scandal since Libor rigging over a decade ago,” she said.

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Obama Said Close to Choosing Lew for Treasury Secretary (Bloomberg) President Barack Obama may choose White House Chief of Staff Jack Lew to replace Treasury Secretary Timothy F. Geithner as soon as this week, according to two people familiar with the matter. The selection of Lew would trigger a White House shuffle for Obama’s second term as he replaces his chief of staff and moves senior aides into new roles, said the people, who requested anonymity to discuss personnel matters. While Obama hasn’t made a final decision to pick Lew, the president’s staff has been instructed to prepare for his nomination, said one of the people. Rescued by a Bailout, AIG May Sue Its Savior (NYT) The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. 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Bill Ackman Says Just Getting Started Exposing Herbalife (Bloomberg) “We’re prepared to spend whatever it costs and do whatever is required to make sure that the world understands the facts about this company,” he said in a telephone interview. “We can’t imagine how the SEC or the Federal Trade Commission or any other relevant regulator will ignore what we have said.” Ackman said he would make all his information available to U.S. regulators. Chinese Tech Titans Eye Brazil (WSJ) The Chinese like emerging markets because, for a change, they don't have to start way behind established American companies. 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After several stake sales in the past two years, Carlyle will finish with a total profit of more than $4 billion, five times the $800 million it invested in CPIC between 2005 and 2007 for a 17 percent stake, Thomson Reuters calculations show. By private equity standards, where making two times cash paid and a few hundred million is considered a success, the CPIC exit is an historic deal for Carlyle. London Quantitative Hedge Funds Report Second Year of Losses (Bloomberg) The performance of the funds belies their popularity with investors, who’ve poured $108.2 billion into the pools since the end of 2008, according to Fairfield, Iowa-based BarclayHedge Ltd. While quants made money during the financial crisis when other hedge funds didn’t, they’ve since stumbled as market sentiment swung from optimism to pessimism following political announcements in Washington and Brussels, breaking up the trends they try to follow. That may force investors to withdraw money. 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