Morning Brief: Brigade Identified as Victim of Concert Ticket Ponzi Scheme

Brigade Capital Management has been identified as the hedge fund that was allegedly defrauded of $4.6 million by radio sports host Craig Carton and others, according to Sports Illustrated. Carton, a sportscaster best known for his bluster, strong opinions, and gambling proclivities, was arrested and charged with securities fraud, wire fraud, and conspiracy, as was his co-conspirator Michael Wright. They and a third individual, identified by the Securities and Exchange Commission as Joseph Meli, were accused of engaging in an elaborate scheme to convince investors they were buying concert tickets for big-name performers such as Adele, Justin Bieber, and Katy Perry and selling those tickets on the secondary market for a big mark-up thanks to deals with concert promoters. Instead, the trio allegedly misappropriated the funds, operating what turned out to be a Ponzi-like scheme. Among the investors they convinced to invest in their operation was Brigade. In its complaint, the SEC laid out the elaborate relationship and trust between the defendants and Brigade without identifying the name of the hedge fund, detailing how Carton and his cohorts convinced Brigade to invest $4.6 million over two separate deals. Brigade managed $18 billion at the beginning of the year. Of that amount, $3 billion to $4 billion had a hedge fund fee structure, according to a source. Brigade general counsel Aaron Daniels did not return a phone call seeking comment.

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Pershing Square Capital Management’s Bill Ackman made a peace offering in his otherwise contentious proxy fight with ADP, the payroll processing and consulting company. The activist hedge fund manager, who on Tuesday filed a definitive proxy statement seeking three seats on the board, called for some sort of compromise. In a letter to the ADP board made public by Pershing Square following a meeting of the two parties, Ackman said his “strong preference” is to end the proxy contest and “come to a resolution on governance.” He said his firm proposed expanding the board by three seats and adding its nominees. “This would eliminate the need for us to replace existing directors and we could begin working together immediately,” Ackman added. “We left the meeting with the strong impression that we could work together very effectively to build on ADP’s strengths to greatly improve the company’s competitiveness, profitability, and growth.”

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Ackman also received good news on Thursday when Credit Suisse raised its price target on Pershing Square holding Restaurant Brands International from $60 to $74. The investment bank also lifted its rating on the stock from Neutral to Outperform. In a note to clients, Credit Suisse said the owner of Tim Hortons and Burger King fits well within its thesis that the sector is saddled with oversupply. “We are looking for reasonably valued names that can grow earnings in the face of considerable sales and margin pressure, and RBI fits this bill,” the note stated. It also said the stock’s valuation is cheaper than it looks, pointing to the company’s above-average unit growth, improving cost of capital, low tax rate, and low capital expenditures. The stock is by far Pershing Square’s largest long position. The hedge fund is also the largest outside investor. Shares of Restaurant Brands on Thursday rose 3.54 percent to close at $76.62.

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Credit Suisse additionally raised its price target of hedge fund favorite Sarepta Therapeutics from $64 to $81 after the investment bank became more hopeful on the future prospects of the biotech company’s muscular dystrophy drug. “We continue to view Sarepta as a top small-cap pick,” the investment bank told clients in a note. At the end of the second quarter, Sarepta’s top-10 holders included Point72 Asset Management, Tourbillon Capital Partners, Millennium Management, and Camber Capital Management. In addition, the stock was the fourteenth largest long position in Perceptive Advisors’ diversified healthcare and biotech portfolio. Despite the big boost in support, shares of Sarepta fell 2.9 percent to close at $45.38.