The Morning Brief: Chipotle Shorts Get Indigestion; Elliott Plans to Raise Stake in Hess; Roomy Khan to Be Sentenced This Week
Chipotle short takes a hit. Shares of Chipotle Mexican Grill jumped $8.21, or 2.71 percent, to close Monday at $31.69, after Lazard raised its stock rating to Buy, from Neutral. At the October Value Investing Congress, David Einhorn said his firm, Greenlight Capital, was shorting the Mexican casual dining company for several reasons, including the potential threat from Taco Bell’s new menu choices. The stock is still $5 below where it was before Einhorn made his presentation, but up about 31 percent from its low in late October, when it reported disappointing results.
Hess Corp. said hedge fund Elliott Associates and Elliott International aims to seek regulatory clearance to add to its stake. In a press release, Hess said Paul Singer’s Elliott may seek to acquire more than $800 million in stock, which works out to about 4 percent of the total outstanding shares. Elliott also told the company it may nominate candidates to Hess’s board of directors at the upcoming annual meeting. At the same time, Hess announced a series of restructuring moves, including plans to exit from the oil refining business and the sale of its U.S. oil storage terminal network.
Separately, Jesse Cohn, a portfolio manager for Elliott Management, issued a statement in response to Friday’s news that Compuware planned a series of measures focused on boostsing profitability, transitioning to higher-growth businesses and awarding an annual dividend of $.50 per share. “This is a good outcome,” Cohn stated. “Compuware has granted our request for access to diligence to confirm an offer for the Company. We will immediately reach out to negotiate an appropriate [non-disclosure agreement] and look forward to moving quickly to engage in diligence with the help of our legal and financial advisors. We remain very interested in the company.”
Also on Monday Jana Partners’ Barry Rosenstein fired off a lengthy response to Agrium’s analyst presentation earlier in the day. He said the Canadian fertilizer company “failed to address numerous core issues” and two critical problems, such as the lack of relevant board experience “and the need for an enhanced shareholder perspective.” Rosenstein, who wants to break Agrium into two companies, said he welcomes the company to the debate but reiterated his claim that his board nominees have more experience than the incumbents.
Prosecutors plan to make the case for the judge to go easy on former Intel executive Roomy Khan because she heavily cooperated with government investigators. Khan is to be sentenced later this week for her role in the Raj Rajaratnam insider trading scandal. However, Khan was also accused of lying, destroying evidence and tipping off other targets of the investigation when she was helping government officials involved in the probe. “Khan’s cooperation with the government, while limited by her failure to be fully truthful and her efforts to protect others, has nonetheless been extremely substantial,” Assistant U.S. Attorneys Christopher LaVigne and Jillian Berman reportedly stated in a letter to U.S. District Judge Jed S. Rakoff.