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The Morning Brief: ValueAct Takes Big Stake in Armstrong Flooring

Jeffrey Ubben’s ValueAct Capital said it owns 4.6 million shares of Armstrong Flooring, or 16.6 percent of the total outstanding shares. The flooring business was spun off from Armstrong World Industries, what was then a flooring and ceiling products company, at the beginning of April. As part of the separation, Jacob Welch, a partner at ValueAct, was named a director of Armstrong Flooring. He will no longer be eligible to serve as a director if the San Francisco investment firm’s stake in the company goes below 7.5 percent, according to the agreement. At year-end, ValueAct was the largest shareholder of Armstrong World Industries. Other top holders were New York-based Eton Park Capital Management, New York-based D.E. Shaw & Co. and Dallas-based Maverick Capital.

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A man who used a fictitious hedge fund and a fictitious auditor to defraud banks and investors was sentenced to 15 years in prison after being convicted of 23 felonies. James Murray of Larkspur, California said he was the only investment advisor of Market Neutral Trading, the supposed hedge fund. He claimed the fund was audited by Jones, Moore & Associates. But that firm also was concocted by Murray. According to the government, Murray engaged in fraudulent credit card transactions, used credit cards he controlled to process more than $650,000 in “sham” transactions, and then received fraudulent refunds on those cards, resulting in losses exceeding $550,000 to the credit card processing company. Altogether, Murray defrauded investors out of more than $2.5 million. He was initially charged with wire fraud in February of 2012, but then was charged in March of 2015 with 23 felonies, including 16 counts of wire fraud.

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Deutsche Bank cut its rating on activist stock Qlik Technologies from buy to hold but kept its target price at $30. The bank points out that the stock is up 70 percent from its mid-February lows and up 20 percent since Elliott Management Corp. disclosed its 9 percent position in the company in early March. The New York hedge fund firm has since boosted its stake in the software maker to 10.8 percent. “We believe that much of the Elliott-induced upside is already in QLIK shares and our fundamental checks are muted,” DB states in a note to clients.

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