Hedge fund manager Paulson & Company believes now is a good time for Allergan to bid on its fellow pharmaceutical company Shire, both companies that Paulson has stakes in. A representative of Paulson contacted Allergan Chief Executive David Pyott last week to make the push to buy. Paulson has a 2 percent stake in Allergan and a 4.5 percent interest in Shire.
The impetus for the shopping spree was the collapse of the deal which AbbVie had to purchase Shire. The merging of the two giant drug companies was severed after the Treasury Department amended the rules of tax inversions, making the deal look considerably less sweet to AbbVie, which consequently backed out. News of the merger’s demise sent Shire’s stock south, causing Paulson to absorb some pretty painful paper losses. Solution: find another buyer for Shire, for instance Paulson’s own Allergan.
As luck would have it, Allergan, in an attempt to discourage a hostile bid for them by Valeant Pharmaceuticals and the hedge fund Pershing Square Capital Management, would like to make a purchase of its own. Allergan has thought about an all-cash buy of Salix Pharmaceuticals, but those negotiations broke down. They have also considered having another drug company, Actavis, purchase them at a better price than what Valeant and Pershing offered.
Despite the fact that Allergan thought about bidding on Shire earlier this year, any interest seems to have died down. The most likely deal in Allergan’s future is the one with Actavis, say people in the know.
After more than one year on the market an historic oceanfront property owned by Hedge fund manager Scott Bommer, has at last been sold. Bommer is a well-known house-flipper in the Hamptons. The home, located at 436 Gin Lane, is also called Halcyon Lodge.
Originally offered for sale in September 2013 for $25 million, the Southhampton estate sold this week for a piddling $16 million, quite a bit less than the $18.3 million Bommer paid. Bummer.
Over the past year the property, which sits on 1.5 acres with 142 of oceanfront had its price lowered numerous times. The house has eight bedrooms, six baths, a heated outdoor dunetop pool and a three bedroom cottage for guests.
In 1946 the Fords commissioned the famous architect Phillip Johnson of “The Glass House” fame to add a one story glass wing to the estate.
It’s been a difficult few years for Radio Shack, the used-to-be popular mid-level electronics retailer. To give the company the boost it needs to get things bubbling again, some hedge funds have stepped up to the plate.
Standard General LP, a New York-based hedge fund and Radio Shack shareholder, along with some other investors, are replacing GE Capital as lead lender under Radio Shack’s senior secured credit facility.
Among the other investors is Litespeed Management LLC, also a NY hedge fund. Together these investors will be pouring about $120 million into Radio Shack for a much-needed infusion of liquidity. It is expected that the investment will be converted into equity in the next few months. Debt will be restructured in conjunction with the infusion of money.
“We recognize that we will need to address constraints under our existing term loan in order to undertake a store base consolidation program and pursue other measures to reduce our cost structure,” RadioShack CEO Joseph Magnacca said. “This amended (credit) provides time to pursue a longer-term restructuring.”
A provider of comprehensive data and research on private equity, real estate, infrastructure funds, hedge funds and other alternative investments, Preqin recently released an infographic illustrating how the hedge fund industry has changed since the financial crisis of 2008.
Since the crisis there has been an increase in the number of hedge funds that have launched. This is despite increased regulation of the industry. In the last six years there has also been a rise in the amount of assets under management in the industry.
Take a look for yourself at this informative infograph.
Speaking on a panel during the Bloomberg Markets Most Influential Summit held last Monday, Julian Robertson, founder of Tiger Management, forewarned his audience that bubbles in the financial markets are about to burst.
Robertson, one of the hedge fund industry’s most successful managers explained that despite a recovering economy, one of the driving forces behind the recovery are smaller bubbles in the financial markets which are eventually going to “bite us.”
“The bubble will burst in a very bad way,” said Robertson.
During the panel discussion Robertson said he is most worried about the bond market. In order to give their economies a nudge governments have been buying bonds, which have caused interest rates to fall. Robertson explained that due to the low interest rates many investors have been forced into the stock market, and the large numbers of people investing in securities is creating a bubble.
Robertson pointed out that bubbles always burst. The reason bubbles form in the first place is because it is hard for investors to see why prices should ever go down. “The drop in 1987 come out to the blue,” Robertson said.
Some investors simply want more for their money than just more money. One way to get a nice return on investment while also rubbing shoulders with celebrities is through a firm called “Media Society.” Based in Los Angeles and launched in 2012, Media Society allows investors to be part of the thrill of Hollywood and also get as much as a 20 percent annualized return on their investment.
Wade Bradley is the CEO of this non-traditional investing platform. He was a commodities trader and venture capitalist until he got into the “investing with the stars” business. Helen Rosenberg is the company’s CFO, who used to work for Barry Diller at Universal Studios and Nielson. Bradley explained that Media Society covers the costs of production, and only will work with the best producers.
Production just finished on a film produced by Donna Gigliotti of “Shakespeare in Love” fame. The new film, “Big Stone Gap” features Ashley Judd, Whoopi Goldberg, Jenna Elfman and Patrick Wilson. At the moment Media Society has a romantic comedy and horror movie in the pipeline to production. Investors can expect big names associated with this film as well.
Investors with Media Society are individuals with $2.5 million net worth or above. They can be financial industry executives, real estate developers, or even professionals from the health care sector. The minimum investment is $150,000, with a target of 30 to 60percent yield during a 36-month time frame.
Better than the return is the added bonus of getting to go to some major Hollywood events with the celebrities and other VIPs involved in the production of the films. Media Society lets its “members” hob-nob with the stars of the entertainment industry.
Walgreens, the country’s largest drugstore chain, named Barry Rosenstein, activist investor and founder of Jana Partners, to join their board of directors. Rosenstein will also get to pick one more director to join him on the board.
The Deerfield, Illinois-based company is feeling pressure from their stockholders since they lowered their earnings forecast based on their recent merge with the giant health and beauty retailer Alliance Boots. AB runs the largest drugstore chain in the United Kingdom. Walgreens’ share price dropped since they lowered their earnings forecast a month ago. They also put on hold the decision to do an overseas reorganization which would have reduced their US tax obligation.
Walgreens stated that Jana Partners will be recommending another independent director who is not connected to either Jana or Walgreens. If another vacancy opens up on the board and Walgreens decides to fill the position, then Jana and Walrgeens must agree on the candidate.
Jana Funds have a 1.3 percent stake in Walgreens, about 12.5 million shares. If the holding falls below 6.3 million shares then, according to the agreement, Rosenstein will resign from the board.
Hedge funds seem to be showing a positively lackluster performance as summer winds down and Labor Day celebrations get underway.
A review of how some of the biggest names in hedge funds are doing shows the answer is “not too good” while, for comparison, the broader stock market arena is already surging with 8 percent gains.
• David Tepper, founder of Appaloosa Management, had an astounding year-in 2013-taking home $3.5 billion on a 42 percent upswing. This year is quite another story. So far his fund only posted a 2.3 percent gain through July, actually loosing 1 percent in July.
• Richard Perry, founder of Perry Capital, is also in a bad position compared to last year. In 2013 Perry Partners gained 22 percent, but not even close this year. The fund fell 1.4 percent in August, showing a yearly gain of only 1.3 percent through August 22.
• Trian Partners’ Nelson Peltz is doing a little better. As of August 22 his fund gained 6.6 percent, with an August gain of 1.9 percent. But compare that with a rise of 40 percent in 2013.
• You might be wondering what ever happened to Jeff Altman and his Owl Creek fund? Last year’s performance was magical, gaining 48.6 percent. This year, not so much. What used to be among the top 2- hedge funds this year fell by 3 percent as of August 22, 2 of those percent in August alone.
Just a reminder that volatility is part and parcel of investing in hedge funds, and past performance is no guarantee of future gains, even for the best of them.
London-based hedge fund executives saw their take home pay crumble as their base salaries and bonuses imploded in 2013. According to Emolument.com, a company which analyses salary levels, there has been a serious change in the volatility in what hedge fund professionals are paid, especially among the highest paid individuals.
Figures show that compensation packages have declined as much as half in 2013 compared with 2012. In 2012/2013 a managing director at a London-based hedge fund could expect a bonus of about £1,236,000. In 2013/2014 that number was slashed to £459,000. Added to the decimated base pay and managers are left with only £660,000, a decline of almost £1.
Despite this sharp reduction in take-home pay, hedge fund professionals still earn approximately triple what mid-level employees make. Vice presidents and directors of hedge funds today average about £226,000, compared to £307,000 two years ago. But this year is definitely better than last year, when the average person in that group said they took home £196,000.
Gabriel Plotkin, former employee of Steven A. Cohen, is now in the process of raising as much as one billion dollars for his as-yet non-existent fund which he has decided to name after his grandfather, Melvin Plotkin.
Plotkin, who is 35, has not discussed the reasons for his decision to name the fund after his grandfather in public, but it is definitely and unusual way to name a new hedge fund.
Cohen named what became his wildly successful SAC fund after his own initials. Daniel Loeb, also a billionaire investor was inspired by his hobby, surfing, to name his fund Third Point. This name refers to a particular place in Malibu Beach where the waves break the highest.
Plotkin’s grandfather was a small-business owner, but is now deceased. Melvin Capital is expected to begin trading this coming year, and observers of the hedge fund sector are anticipating it’s launching with excitement. Plotkin has been one of SAC Capital’s most successful traders in recent years. At one point Mr. Plotkin and his management team focused on a portfolio made up mostly of consumer product stocks whose value totaled about $1.3 billion. This summer he has been toning down his trading and increasingly focusing on setting up his own firm.
Plotkin and Cohen will maintain their relationship, just not as employer and employee. Cohen has agreed to invest as much as $200 million in Melvin Capital. It is expected that when the new fund is ready to launch that he will take his team of assistant traders and analysts with him. It is not yet known where Melvin will set up home. We will have to just wait and see.