The Morning Brief: Justice OKs Charter Buy of Time Warner Cable
Monday was a big day for one of the most popular hedge fund risk-arbitrage plays. Shares of Time Warner Cable jumped 4 percent and Charter Communications surged 4.6 percent after the Justice Department approved Charter’s plan to acquire Time Warner Cable and Bright House Networks under certain conditions. The Federal Communications Commission also moved closer to approving the deal. Shares of Time Warner Cable are up about 13 percent this year, while Charter is up 12.5 percent. At year-end, at least 122 hedge funds held positions in Time Warner Cable, making it the eighth-most widely-held hedge fund stock.
At year-end, Christopher Hohn’s The Children’s Investment Fund Management UK was the cable company’s third-largest shareholder, New York-based Soroban Capital Partners was the fifth largest while New York-based Paulson & Co. was the seventh-largest shareholder. At year-end, 91 hedge funds held a position in Charter, which was also the most widely held stock among the Tiger Cubs, Seeds and Grandcubs, with 18 Tiger-related firms holding the stock. This includes Greenwich, Connecticut-based Lone Pine Capital, the fifth-largest shareholder, and New York-based Coatue Management, the tenth largest. It was also a major position of TCI.
William Ackman’s Pershing Square Capital Management said it sold 4.1 million shares of Canadian Pacific Railway for $148.25 per share. All of the sales took place on Friday, April 22. We reported that on April 21 UBS raised its price target on shares of Canadian Pacific from $196 to $217. UBS made the move after the railroad reported that it had boosted earnings through productivity improvements, generating, as the UBS note said, “strong cost-side performance and impressive…margin improvement.” The stock is up more than 16 percent for the year through the day Pershing Square sold its shares. The stock, however, fell 3.25 percent on Monday.
In a separate regulatory filing, Pershing Square said it will not request animal-health company Zoetis reappoint William Doyle, a member of the hedge fund firm’s investment team, to another term as a director. As a result, his tenure will end on May 12. In the regulatory filing, Pershing Square says it was “pleased” with the a company’s “progress in implementing its previously announced initiatives to simplify operations, improve cost structure, and better allocate resources.”
UBS cut its price target on Netflix from $147 to $141. However, this means the Swiss bank sees 47 percent potential upside in the shares of the streaming-video company. Last week the stock slumped after the company issued disappointing guidance for future subscriber rolls. “We believe expectations for growth have been reset and catalysts rebuilding for Netflix, after a negative catalyst period,” UBS said in a report. The stock dropped about 2.4 percent on Monday to close at $93.56.
Viking Global Investors disclosed it owns more than 10.1 million shares of Rice Energy, or 6.5 percent of the natural gas and oil company. The position was taken on April 15, the day the company completed an offering of nearly 30 million shares at $16.35 per share.
Investors in hedge fund firms appear to be chasing recent returns. According to a new eVestment report, hedge fund firms with more than $1 billion in assets that were up even slightly in 2015 saw $2.84 billion of inflows in March and $6.3 billion for the entire quarter. In addition, funds that posted gains of more than 5 percent last year had net inflows of $10.36 billion in March and $26.65 billion in the first quarter. Altogether, investors redeemed about $4.6 billion (net) from hedge funds in March. Even so, performance gains exceeded that amount. As a result, total industry assets rose $29.59 billion last month, to $2.982 trillion.