Shares of Idenix Pharmaceuticals rocketed 40 percent on Friday without any apparent news. On Wednesday it reported disappointing results, as the clinical-stage biopharmaceutical company went from a profit to a loss that was higher than expected on lower revenue. So what happened? Well, after the market closed, Seth Klarman’s Baupost Group disclosed it owned 10.32 percent of the shares in a 13D filing. The eclectic investment firm, which rarely devotes a big portion of its portfolio to common stocks, indicated it may take an activist stance in the future under certain circumstances.
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Also on Friday, shares of American International Group (AIG) plunged more than 6 percent, to close at $48.28, after it reported quarterly results that were disappointing to some investors. UBS Friday published a note reminding clients it has a neutral rating on the stock and a $48 price target, which was well below the price before the results were announced. Remember, the stock had the highest number of hedge funds counting it among their top-10 holdings at the end of the second quarter.
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San Francisco-based Lonestar Capital Management disclosed a 5.7 percent stake in Lee Enterprises, a media company with a roughly $160 million market capitalization. In a 13D filing, the event-driven hedge fund firm says the investment is “not for the purpose of acquiring control of the company.” However, it did say it may seek to discuss with other shareholders, officers of the company or members of the board of directors the company’s operations, financial performance, capital structure and cash flow.
“LCM commends management for generating significant operating cash flow in a difficult industry environment,” it adds in the regulatory filing. “LCM applauds the significant deleveraging that has taken place since the company’s emergence from bankruptcy in January 2012, and believes that the company has good prospects for further deleveraging.”
But then comes the inevitable “however.” The hedge fund complains that cash interest expense is “overly onerous” in light of the company’s strong operating performance. “LCM believes the company is now in a position to address aspects of its capital structure and therefore encourages management to explore a variety of financing options that would result in a greater portion of free cash flow accreting to shareholders rather than servicing debt,” it says. The stock surged more than 10 percent on Friday, to close at $3.04.
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Shares of J.C. Penney surged more than 8 percent, to close at $8.14, on Friday. Incredibly, investors heavily bid up the stock price after ITG Investment Research raised its sales forecast due to “improving sales trends” in five of the last seven weeks. Really? This warrants such a big stock move? Seems to me the move is because the shorts panicked and bailed, not because the value hunters thought it was a reason to bank on a big turnaround.
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The New York-based Ziff Brothers Investments, a family office of the former publishing titans, is planning to shut down its U.S. hedge fund operation and fund some of the key people who are launching their own firms, according to a Wall Street Journal report. The Ziff family office also may earmark some of the hedge fund money to its London-based hedge fund operation.
