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The Morning Brief: More Pain for Pershing Square’s Ackman; More Details on Third Point Re IPO

William Ackman’s Pershing Square Capital Management hedge fund lost 2.2 percent in July. This trimmed its gains for the year to 3.8 percent. The decline last month is not surprising given that shares of Ackman's high-profile short position, Herbalife, surged about 45 percent in July while J.C. Penney, his high profile long, lost 17 percent last month. On Monday, Herbalife climbed another 4 percent or so, closing at a new all-time high of $66.67. Meanwhile, shares of J.C. Penney plummeted 3.15 percent to $13.83, its lowest price in 10 years.

Third Point Reinsurance, Ltd., Thrird Point founder Daniel Loeb’s reinsurance arm, said it is seeking to raise more than $370 million in its initial public offering, according to an amended filing with the Securities and Exchange Commission. The company plans to sell 22.2 million shares for between $12.50 and $14.50 per share. Under their arrangement, the Third Point hedge fund firm will manage most of the reinsurance company’s investable assets. Third Point is the latest hedge fund to create a reinsurance company as a source of so-called permanent capital. The most high profile reinsurance company related to a hedge fund is David Einhorn’s Greenlight Re. In the prospectus, Third Point Reinsurance said it plans to use the net proceeds from the IPO for general corporate purposes, including the costs associated with being a public company. It also said it plans to contribute “substantially all the remaining net proceeds” to Third Point Re’s surplus to increase its underwriting capacity in order to support the growth of its reinsurance premium writings.

Another quant fund is in the red this year. Aspect Diversified, managed by Aspect Capital in London, lost 1.84 percent in July, extending its loss for the year to 2.69 percent.

The New York-based activist hedge fund Starboard Value LP has reduced its stake in two holdings. It sold more than two million shares of Extreme Networks, lowering its stake to 4.9 percent. This means it is no longer required to report additional sales in amended 13D filings. This is its second major sale of Extreme’s stock in two weeks.

In addition, Starboard reduced its stake in TriQuint Semiconductor to around 6 percent from 7.8 percent. The stock is up more than 17 percent in less than two weeks and 85 percent since the end of February.

In other Starboard news, the hedge fund, which is embroiled in a proxy fight with Office Depot, issued a more than 100-page white paper presentation laying out its plan for significantly boosting the operating performance and value of the office supplies retailer. It made the case for raising operating margins from 0.9 percent to 7.3 percent, explained why significant change is necessary at Office Depot and urged shareholders to elect its four director nominees — Cynthia Jamison, Robert Nardelli, Starboard co-founder and CEO Jeffrey Smith and Joseph S. Vassalluzzo. Smith serves on the board of directors of Regis Corp. and Quantum Corp. and previously served as chairman of Phoenix Technologies. He has also served on the boards of Zoran Corp., Actel Corp., S1 Corp., Kensey Nash and SurModics Inc.

Steve Cohen’s SAC Capital Advisors disclosed late Monday it owns 5.1 percent of The Children’s Place retail stores. The filing indicates it is a passive investment.

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