The battle between Third Point’s Daniel Loeb and Dow Chemical is heating up. On Tuesday afternoon Dow blew off the activist hedge fund’s proposal to spin off its commodity-chemicals and plastics assets. In a detailed regulatory filing, the company said that after a broad and thorough review of its strategic options, a break-up of the company in a significant manner “created no productivity or capital allocation improvements, but rather negatively impacted Dow’s value proposition which leverages scale, integration costs and technology benefits across multiple science-based, vertically integrated value chains.”
It added that its plan to transition Dow from a commodity-based model into a vertically integrated science company focused on specialty materials, agriculture, and specialty plastics “is the right strategy to maximize value” for all shareholders in the short and long term.
Wednesday afternoon, Loeb responded with a statement asserting that Dow has asked shareholders to accept its word that Third Point’s proposal to split the Petro and Specialty Chemical businesses would not increase value. “Unfortunately, Dow’s lack of transparency means we know neither the methodology nor even the advisors used to arrive at its decision,” it added. Loeb said he is prepared to sign a non-disclosure agreement (NDA) to review and discuss the analysis that led Dow to its conclusions. “We look forward to having a constructive dialogue among our own financial advisors, CEO Andrew Liveris, and Dow’s Board, which we believe can ultimately result in significant value for all shareholders,” Loeb added. Dow’s stock dropped 1 percent, to close at $46.37.
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Paul Hudson’s Greenwich, Connecticutbased Glade Brook Capital Partners has launched a new private equity fund. According to a regulatory filing, the hedge fund firm has raised nearly $127 million for Glade Brook Private Investors II LP. We recently pointed out that Glade Brook Private Investors (GBPI), Glade Brooks first pre-IPO private equity fund, returned about 219 percent net in 2013, driven by the appreciation in the equity value of Alibaba Group Holding, according to the firms year-end report. GBPI was formed to invest exclusively in the equity of privately held Alibaba, the largest e-commerce company in China, which is planning to go public sometime this year.
Hudson said he believes these pre-IPO strategies will help the hedge funds to generate excess returns. Glade Brook was founded in October 2011 and at year-end had $933 million in assets, with $832 million in the firms hedge funds and $101 million in GBPI. Last year Glade Brook Global Domestic Fund and Glade Brook Global Offshore Fund, the firms two hedge funds, returned 19.9 percent.
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In another high profile activist position, William Ackman’s Pershing Square Capital Management stepped up its pressure on Herbalife, releasing a white paper on an individual the hedge fund calls “a key player in Herbalife’s recruitment schemes and a member of its Founders Circle” which it believes boosts its case that the multi-level marketer of nutrition supplements is a pyramid scheme.
“Herbalife relies upon such recruitment schemes to constantly replace members who drop out each year,” it states. “It rewards and promotes leaders such as Leslie Stanford, who is a former board member of the company and at the center of its recruitment process.” Pershing Square says Stanford runs the online recruiting business Success Connection, which sells training videos, recruiting scripts and other business tools to Herbalife distributors. The hedge fund claims her recruitment materials “make blatantly false claims about making money through Herbalife.” Herbalife’s stock closed down 0.89 percent on Thursday, at $65.60.
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Investors are bullish on Asian hedge funds. Total capital grew to $112.3 billion at the end of 2013, up from $88.2 billion the year before, according to industry tracker Hedge Fund Research. Investors pumped $4.2 billion in new capital to the region’s hedge funds in the fourth quarter alone, the highest quarterly inflows since HFR began tracking this slice of the industry in the first quarter of 2008. Total inflows in 2013 totaled $10.5 billion. Little surprise, Equity Hedge and Event Driven strategies led the way. Strong performance also played a big role in the asset growth. The HFRX Japan Index rose 32.8 percent in 2013, while the HFRX China Index gained 19 percent.
Green Mountain Coffee Roasters fell slightly Wednesday after at least one analyst cut the rating on the stock in light of the company’s announcement last week that it is teaming up with Coca-Cola to introduce a single-serving cold beverage maker. Longbow Research downgraded the stock to neutral from buy, citing also the stock’s valuation. The stock, which David Einhorn’s Greenlight Capital is short, had jumped nearly 50 percent in four trading days following its Coca-Cola announcement.
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Hedge fund manager Marlon Quan and his Greenwich, Connecticut firms — Stewardship Investment Advisors, Acorn Capital Group and ACG II — were found liable of securities fraud in civil court stemming from the Thomas Petters Ponzi scheme, according to the Securities and Exchange Commission. As a result, the regulator said it is seeking a permanent injunction against Quan and his firms as well as an order of disgorgement, prejudgment interest, and financial penalties. The SEC had alleged that Quan and his firms “facilitated the Petters fraud” and funneled several hundred million dollars of investor money into the scheme. It also accused Quan and his firms of investing hedge fund assets with Petters and pocketing millions of dollars in fees. “Quan and his firms falsely assured investors that their money would be protected by use of a number of safeguards,” it adds in its announcement.
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Credit Suisse raised its price target on TripAdvisor to $94 from $90 following the travel-related website firm’s fourth-quarter report, which the investment bank called “solid.” Sure enough, the stock surged more than 7 percent, to close at $90.27.
