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The Morning Brief: Herbalife Shares Sink; Sony Takes Loeb Seriously

Another day, another sharp move for Herbalife’s stock. Shares of the nutrition supplements company sunk nearly 7 percent on Wednesday to $47.05, on nearly double the average daily volume after the stock had surged the prior few days. The company also announced that it has hired PricewaterhouseCoopers LLP as its new auditor for the 2013 calendar year. PwC will also re-audit the company’s financial statements for 2010 through 2012.

Herbalife was forced to find a new auditor after KPMG in early April resigned due to alleged insider trading in the company’s stock by one of KPMG’s former partners who at the time was KPMG’s engagement partner on Herbalife’s audit. Interestingly, Herbalife said it hired PwC even though the accounting firm previously performed non-audit services for Herbalife that are not permitted under the SEC’s auditor independence rules.

“The audit committee and PwC discussed these non-audit services and concluded that the provision of these non-audit services will not affect PwC’s objectivity or its impartiality and will not impair its ability to serve as the company’s independent registered public accounting firm,” Herbalife stated in a regulatory filing. It added that the audit committee and PwC noted that all but one of these services were provided to entities that were immaterial to the company’s financial statements. It also stressed that PwC promised that none of the professionals who provided these services will serve on the re-audit or future audits. Altogether, Herbalife said it paid PwC $55,000 in fees in 2013, $250,000 in 2012, $192,000 in 2011 and $330,000 in 2010.


The San Jose Federated City Employees Retirement System recently invested $90 million with four hedge fund managers, according to a Pensions & Investments report. The pension fund invested $30 million in a multistrategy hedge fund managed by the New York-based D.E. Shaw Group and $20 million in a multistrategy fund managed by New York-based Senator Investment Group. It also invested $20 million apiece to two UK-based commodity trading advisers — Cantab Capital Partners and BlueCrest Capital Management.

In other pension news, the New Jersey Division of Investment recently invested $100 million in New York-based JANA Partners’ flagship Strategic Investments Fund.


Total assets allocated to emerging markets hedge funds climbed by $12 billion in the first quarter, to a record $151 billion, according to Chicago-based industry tracker Hedge Fund Research. This is the third consecutive quarterly AUM record for emerging markets hedge funds. “While EM hedge funds have been active in equity and fixed income markets, they have also positioned for opportunities and mitigated local market risks in volatile currency and commodity markets,” HFR stated in an announcement. The HFRX Multi-Emerging Markets Index was up 5.9 percent through April. During the same period, the HFRX China and HFRX Korea Indices rose 8.8 percent and 10 percent, respectively; the HFRI EM: Latin America Index rose 2.2 percent; while the HFRI EM: Russia/Eastern Europe Index gained just 0.8 percent.


It looks like Sony’s directors are taking activist investor Dan Loeb seriously. The Japanese electronics and tech giant is reportedly mulling the New York-based Third Point founder’s recommendation that it take public part of its entertainment business. “It’s only a start,” chief executive officer Kazuo Hirai reportedly stated. “It’s important that the board will discuss this and come to a decision that represents Sony’s stance.”

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