Philip Falcone may no longer work on Wall Street, but he still enjoyed a huge payday. Harbinger Group announced that Falcone resigned as chief executive officer and chairman of the board and will be replaced as chairman by Joseph Steinberg, an independent director. Under the deal, Falcone will receive $40.3 million, including a $20.5 million one-time payment, $16.5 million related to Falcone’s 2014 bonus and $3.3 million as a pro-rata bonus for fiscal 2015. Harbinger also said warrants to acquire common stock that were previously awarded to Falcone will continue to vest.
Falcone’s hedge funds took over Harbinger Group in 2009 and used the publicly-traded vehicle to invest in a portfolio of companies. In August 2013, Falcone and his hedge fund firm, Harbinger Capital Partners, agreed to pay more than $18 million and to be barred from the securities industry for at least five years as part of a settlement with the Securities and Exchange Commission stemming from enforcement actions in June 2012. Falcone was accused of improperly using $113 million in fund assets to pay his personal taxes, secretly favoring certain customer redemption requests at the expense of other investors, and conducting an improper “short squeeze” in bonds issued by a Canadian manufacturing company. He also was required to liquidate his hedge funds.
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A former analyst at Chicago hedge fund giant Citadel told federal investigators he made millions of dollars using insider information to trade the shares of Dell while working at the firm, according to a Bloomberg report. The analyst, Richard Farmer, told authorities in December 2011 that he received the critical information from a Dell employee, Rob Ray, in 2008 and 2009, in one case betting that the stock would fall after being told the computer company would report disappointing earnings. Sure enough, the Citadel employee made $5 million to $6 million after Dell’s stock dropped more than 10 percent, according to Bloomberg. In return for the confidential information, the Citadel analyst helped the Dell employee look for a job on Wall Street, in what federal agents called an ‘I’ll scratch your back if you scratch mine’” relationship, according to the report, citing a summary written by agents of a January 4, 2012, interview with the analyst. Neither individual was sued by regulators or prosecuted because federal authorities did not have enough evidence. Bloomberg stresses that Citadel, headed by Kenneth Griffin, was not accused of wrongdoing.
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Jeffrey Smith’s Starboard Value raised its stake in chemical maker LSB Industries to 7.2 percent. Back in early April, the company agreed to name three individuals to its board of directors as part of a settlement and standstill agreement with the New York–based hedge fund firm. In its latest regulatory filing, Starboard said it continues to believe the company “has several viable alternatives available to create substantial value for stockholders.” It then used boiler-plate language to indicate it may take future actions.
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Total capital in emerging markets hedge funds rose a mere $700 million in the third quarter compared with the previous period, but still brought the total to a record $185.15 billion, according to Chicago-based data tracker Hedge Fund Research. Net inflows amounted to $300 million, while outflows were $200 million, resulting in a net $100 million in new money invested in emerging market funds. The other $600 million came from performance gains. Altogether, there has been $3.5 billion in total emerging market hedge fund inflows year-to-date. This works out to nearly half of the $6.45 billion of inflows in 2013.
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Tiger Global Management participated in a $600 million, Series H financing for Flipkart, the largest online retailer in India. This is at least the seventh investment the New York investment firm has made in the company, according to crunchbase.com. The most recent investment was made in July, when Tiger Global participated in a $1 billion financing.
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Deutsche Bank cut its price target on hedge fund activist favorite Hertz Global Holdings, from $24 to $22. It also maintained its Hold rating. “We sense a fair amount of optimism baked into the stock at this point and view HTZ’s road to recovery as a long one that still has many uncertainties and potential pitfalls,” the bank tells clients in a note. The auto rental giant last week named John Tague as its new CEO and president.
It recently announced it will restate its 2012 and 2013 annual and quarterly financial statements to correct accounting errors, having previously announced plans to restate 2011 financials. In September, Hertz agreed to a deal with Carl Icahn, who was given three seats on the board. One month later, Barry Rosenstein’s Jana Partners boosted its stake in Hertz to 7 percent of the total outstanding.
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Meanwhile, Deutsche Bank also cut its price target on hedge fund favorite Workday from $100 to $90, noting that the software company recently reported “mixed” results for the third fiscal quarter. It also kept its Hold rating on the stock. At the end of the third quarter, Workday’s tenth largest shareholder was Stephen Mandel, Jr.’s Lone Pine Capital. Other significant holders include Kenneth Griffin’s Citadel, John Griffin’s Blue Ridge Capital and Daniel Benton’s Andor Capital Management, who counts the stock as his seventh largest holding in his concentrated portfolio.
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D.E. Shaw & Co. said it owns 5.1 percent of Liberty Broadband Corporation, whose main assets are an interest in Charter Communications, its subsidiary TruePosition and an investment in Time Warner Cable.
