This content is from: Portfolio

The Morning Brief: Apple Watchers Await News from Annual Meet; Valueact Takes More of Willis Group

Heads up! On Wednesday Apple’s annual shareholder meeting at its Cupertino, Calif. headquarters will have hedge fund managers tuning in for possible announcements regarding its huge cash trove. One rumor making the rounds is that the company will split its stock. In any case, the computer maker, whose stock has slipped about 35 percent from its 52-week high of $705.07, is still the most widely held among hedge fund managers, though their numbers have dropped. Apple shares are now held by 67 hedge funds, as one of their top 10 holdings, down from 109 at the end of the third quarter, according to a recent analysis by Goldman Sachs Group.

Jeff Ubben’s ValueAct Capital lifted its stake in insurance broker Willis Group Holdings to 7.5 percent, from 6 percent. The activist investor bought its most recent shares from January 17 through February 25 for between $34.63 and $36.85 a share. Willis Group’s shares closed up 1.06 percent Tuesday, at $37.27. Meanwhile, another ValueAct holding has become an acquisition target. Last week, industrial machinery maker Gardner Denver reportedly received a buyout offer from Kohlberg Kravis Roberts for $75 per share in cash, or about $3.7 billion. The $75-per share takeout price is a 44 percent premium to the stock price on July 26, when ValueAct sent a letter to the company board encouraging it to sell the company. Citing a source, Reuters reported February 22 that several of the company’s top shareholders, including ValueAct, have said they would support the offer. Shares closed at $69.75 Tuesday, up $0.50.

Andrew Law’s Caxton Associates disclosed a 5.4 percent stake in US Airways Group, which has agreed to merge with American Airlines for $11 billion. The investment, revealed in a 13G filing, is one of several arbitrage moves on the proposed transaction. Under the terms of the deal, US Airways shareholders will receive one share of common stock of the combined airline for each share of US Airways common stock held. US Airways shares gained 1.84 percent Tuesday, to close at $13.26.

The Securities and Exchange Commission continues to crack down on unscrupulous hedge fund managers. On Tuesday U.S. regulators said it charged the two co-owners of the hedge fund advisory firm Ridgefield, Connecticut–based New Stream Capital with lying to investors before it failed during the financial crisis. David Bryson and Bart Gutekunst were accused of secretly changing the fund’s capital structure before it collapsed in a scheme to retain its largest investor, Gottex Fund Management. Gottex invested $300 million of the $750 million invested in the hedge fund that focused on illiquid investments in asset-based lending. In March 2008, Gottex threatened to pull out its money.

According to the SEC, Bryson and Gutekunst instructed their firm’s marketing department to continue marketing the hedge fund as though all investors had equal rights, even though Gottex had priority over other fund investors should the fund be liquidated. The SEC also charged New Stream’s former CFO, Richard Pereira, and former head of investor relations, Tara Bryson, David Bryson’s sister. Tara Bryson agreed to settle the SEC charges. The regulator also charged New Stream’s Cayman Islands affiliate. The SEC said this entity helped to raise nearly $50 million, which generated “lucrative fees” even as investors were left with nearly worthless holdings when the fund went bankrupt. “Bryson and Gutekunst told investors they were all investing on equal terms when in fact some were investing in a fund that had been secretly restructured to their detriment,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. The U.S. Attorney for the District of Connecticut also announced criminal charges against Bryson, Gutekunst, and Pereira.

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