This content is from: Portfolio

The Morning Brief: Two Charged In Herbalife Insider Trading Case

The Securities and Exchange Commission has charged the roommate of an analyst who worked for William Ackman’s Pershing Square Capital Management and another individual with insider trading in shares of Herbalife ahead of the hedge fund manager’s public announcement that he had taken a $1 billion short position against the multi-level marketer of nutrition supplements. The regulator alleges that Filip Szymik learned of the famous trade from his roommate — who was not charged or named by the regulator — and then tipped off Jordan Peixoto, who purchased Herbalife put options on December 19, 2012, one day before Ackman’s announcement. As a result, Peixoto illegally earned $47,100. In a settlement, Szymik agreed to pay a $47,100 civil penalty. The SEC instituted cease-and-desist proceedings against Peixoto.

The New York Times identified the former Pershing Square analyst as Mariusz Adamski. The Times cited “people briefed on the matter” and reported that Adamski’s lawyer declined to comment.

___

EBay announced it plans to spin off its highly profitable PayPal unit. Carl Icahn had been urging the company to make this move since early this year in order to boost shareholder value. Meanwhile, Reuters reports that Daniel Loeb’s New York-based hedge fund firm Third Point has taken a “significant” stake in EBay. In addition, Third Point had talks with the CEO of EBay, according to the report.

___

James Mitarotonda’s Barington Capital Group disclosed in a joint regulatory filing that it owns 4.59 percent of Eastern Company, while another investment firm, Hilco Inc., owns 0.64 percent of the company. The combined stake of 5.23 percent triggered a 13D filing. The filing states that on two occasions in July, Mitarotonda and others from Barington met with Eastern chairman, president and chief executive officer Leonard Leganza and other representatives from the company and told Leganza they believed “the company has underperformed its value potential for a substantial period of time” and that the stock price could be boosted by growing through acquisitions, as well as by accelerating organic growth and increasing product innovation.

In late July Mitarotonda proposed that the company — a manufacturer of industrial hardware, security products and metal castings — add two directors recommended by Barington “that are reasonably acceptable to its current directors,” as well as grant to Barington restricted shares of common stock that would vest in specified increments if the stock price meets or exceeds certain thresholds. The filing also says that Mitarotonda received a letter from Eastern on September 29 rejecting his proposal to add board members. It also said that while the board would welcome proposals regarding potential acquisitions and would compensate Barington if a transaction was completed, “the board believes that the company’s in-house resources are adequate in the other areas where Barington offered assistance.”

The two parties also agreed to continue speaking. Barington has been a lesser known activist hedge fund firm for a number of years. However, it was early into agitating for change at Darden Restaurants, currently a target of a proxy fight by Jeffrey Smith’s Starboard Value.

___

Charles (Chase) Coleman III’s Tiger Global Management was one among several previous investors that participated in a new $75 million, Series D financing for Credit Karma, a San Francisco-based consumer credit startup. The other investors are Google Capital and Susquehanna Growth Equity, according to a company announcement. The company is now valued at over $1 billion, according to CrunchBase. Credit Karma provides free credit scores and helps users search for credit cards, loans and mortgages. Eight months ago, it raised $85 million in a Series C round from several investors, including Tiger Global.

___

Teen retailer Delia’s Inc. said it has received several inquiries regarding a potential acquisition of the company. As a result, the board of directors will “explore and evaluate strategic alternatives,” including a possible sale, merger, or other form of business combination, the company said in a press release. The company also said it may consider debt or equity financing alternatives. It retained Janney Montgomery Scott as its financial advisor.

Delia’s said no “binding offers” have been made and there is no set timetable for the strategic review process. The struggling retailer has attracted a large contingent of high-profile hedge fund managers, including Omega Advisors’ Leon Cooperman and Tiger Cub David Gallo, founder of New York-based Valinor Management, the two largest investors in the stock. Other major holders include Tiger Global Management and P.A.W. Capital Partners.

___

Kenneth Griffin’s Citadel disclosed that it owns 4 million shares, or 5.2 percent, of Acxiom Corporation, a marketing technology firm. At the end of the second quarter it owned about 1.3 million shares, as well as put and call options on the stock.

___

Stephen Mandel, Jr.’s Lone Pine Capital disclosed it owns 6.85 million shares of Tiffany, or 5.3 percent of the total outstanding of the luxury retailer. It owned 4.2 million shares at the end of the second quarter.

___

Eric Mindich’s Eton Park Capital Management more than tripled its stake in Riverbed Technology, which helps boost IT performance in large networks, to 9 million shares, or 5.63 percent of the total outstanding.

Related Content