What a blood bath. Shares of Hertz Global Holdings — a favorite of hedge funds and Carl Icahn — fell 22.5 percent on Tuesday, to close at $27.71, after initially dropping by more than 50 percent when the car rental giant reported third-quarter revenues and earnings that were much worse than analysts were expecting and issued guidance that was much lower than Wall Street was modeling. Icahn bought another 15 million shares of Hertz yesterday, at prices of $22.64 and $25.02, boosting his stake to more than 33 percent.
Predictably, investment banks cut their ratings and price targets after the negative report. For example, Deutsche Bank reduced its rating on the stock from buy to hold and its price target from $59 to $24. In July, Icahn boosted his stake in Hertz to nearly 13 million shares, or more than 15 percent of the total. At the end of the second quarter, Larry Robbins’s Glenview Capital Management was the largest shareholder, with 11 million shares, while Highfields Capital Management was the fourth-largest investor. Other top shareholders include SRS Investment Management and Fir Tree Partners.
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Shares of another big hedge fund favorite, Valeant Pharmaceuticals, plunged nearly 22 percent, to close at $14.98, after the struggling drug maker slashed its revenue and earnings forecasts and took a huge goodwill impairment charge, mostly for its Salix drug business, which it is trying to sell. In addition, the company received a warning letter from a healthcare-related regulator regarding an inspection at one of its facilities. At the end of the second quarter, Pershing Square Capital Management was the largest shareholder, Paulson & Co. was the second-largest shareholder, and ValueAct Capital Management was the fourth-largest shareholder.
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The British Broadcasting Corp.’s pension trust is the latest among the growing list of major investors to cut their allocations to hedge funds, citing high fees. “We’re not terribly enthusiastic about the idea of paying a manager two and twenty just to go to the casino on our behalf,” James Duberly, the BBC’s director of pension investments, told Bloomberg in an interview. The Trust has nearly halved its allocation to hedge funds since 2012. Today the strategy accounts for just 3 percent of total assets of $19 billion, according to the report.
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New York-based Elliott Management Corp. disclosed it owns 5.4 percent of GTY Technology Holdings, a blank check company formed by the former CEOs of Accenture and EMC to acquire a technology business.
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Eddie Lampert, head of ESL Investments, disclosed he bought another 699,000 shares of Sears Hometown and Outlet Stores on November 4 for a little less than $5 apiece. This is the third time he has bought shares of the Sears Holdings spinoff in less than two weeks.
