shares

Stocks hike 3.9% in Seoul

by on August 24, 2011

menafn.com…

(MENAFN – Saudi Press Agency) Shares bounced back Tuesday on the Seoul stock exchange on bargain hunting following recent heavy losses. The benchmark Kospi index rose 65.98 points, or 3.9 per cent, …

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Stocks hike 3.9% in Seoul

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Video: Bloomberg’s Johnson Discusses Trading of LinkedIn Shares

by on May 27, 2011

May 27 (Bloomberg) — Bloomberg’s Cory Johnson discusses trading of LinkedIn Corp.’s shares. Investors unable to short sell LinkedIn, which just completed the hottest U.S. stock offering since at least 2006, can start betting against the shares using options today. Johnson speaks on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

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Video: Bloomberg’s Johnson Discusses Trading of LinkedIn Shares

AIG Shares Fall Low Enough To Threaten Government Loss

May 9, 2011

Shares in bailed-out insurer American International Group (AIG.N) fell to their lowest levels in nearly eight months on Monday, potentially moving them into loss-making territory for the U.S. Treasury. The Treasury holds 92.11 percent of AIG and has a break-even point of about $28.72 per share on the stock. AIG shares fell 3.7 percent to $29.57 in morning trade. Assuming the government were to sell the stock at a 3 percent discount to its closing price — as researchers say the Treasury did with its shares in Citigroup (C.N) — it would lose money on the sale. In mid-January, the government stood to make a profit of more than $27 billion on its AIG stock, but the shares have lost more than a third of their value since. Last Thursday, AIG reported a loss of more than $1 billion from continuing operations for the first quarter. The Treasury and the company are expected to sell billions of dollars in stock this month, as the company demonstrates an ability to raise capital and the government embarks on reducing its stake. AIG has said it expects the government to have sold off its whole position by mid-2012. (Reporting by Ben Berkowitz, editing by Gerald E. McCormick) Copyright 2011 Thomson Reuters. Click for Restrictions .

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GE CFO: ‘Best Earnings Outlook In The Last 10 Years’

April 27, 2011

SALT LAKE CITY (Scott Malone) – General Electric Co sees its best earnings growth prospects in a decade as the global economic recovery drives demand for the heavy energy and aviation equipment it makes, top executives said. Rising oil prices have not yet taken a toll on global growth rates, Chief Executive Jeff Immelt said at the company’s shareholder meeting on Wednesday. “Things are getting better every day. The global economy outside the U.S. is strong,” he told reporters. Asked about oil prices, which have risen about 33 percent over the past year on rising demand, particularly in emerging markets, Immelt said they have not yet taken a toll on growth. “It’s something to think about, but it doesn’t seem to be hurting the economy,” he said. The U.S. economy is also improving, he added, although the housing sector remains a weak spot. GE believes its profit growth over the next few years will be the best it has seen in a decade, officials said. “This is the best earnings outlook we’ve had in the last 10 years,” Chief Financial Officer Keith Sherin told a crowd of 268 shareholders. GE no longer provides investors with numeric profit forecasts; but analysts on average look for earnings per share excluding one-time items to rise 16.5 percent this year, according to Thomson Reuters I/B/E/S. GE, which employs about 134,000 people in the United States, each year holds its annual shareholder meeting in a different city where it has operations. Its energy, healthcare and finance arms all have a presence in Salt Lake City. In a nod to the prevalence of firearms in the Western United States, the sign directing shareholders to the meeting’s location in the city’s Salt Palace convention center pointed out that no guns would be allowed in the meeting room. NUCLEAR OUTLOOK UNCLEAR The future of the nuclear power industry is unclear in the wake of the disaster at Japan’s Fukushima power plant, where GE designed the turbines, Immelt said. “It’s too soon to say what the future of the nuclear business is going to be,” he said. GE’s nuclear operations are a joint venture with Japan’s Hitachi Ltd. The world’s largest maker of jet engines and electric turbines has seen its stock price more than triple from its recessionary lows below $6, though the shares remain at about half their level before Immelt took the top job from Jack Welch a decade ago. Immelt told shareholders that even through the recession and financial crisis, “in every year we earned more money than when the stock traded at an all-time high.” GE shares were up 2.7 percent to $20.64 on the New York Stock Exchange. Over the past year, the shares have risen 4 percent, lagging the 12 percent rise of the Dow Jones industrial average, of which it is a component. Immelt faced shareholder questions on issues ranging from his appointment as an economic adviser to the Obama administration to GE’s past support of efforts to attach a price to emissions of the greenhouse gas carbon dioxide. No shareholders asked about the company’s low tax rate — which has been in the public eye over the past month — though a group of several dozen protesters who said they were affiliated with the conservative Tea Party movement gathered outside to protest it. Shareholders approved company-backed resolutions including the election of the board and a proposal to have a nonbinding “say on pay” vote each year. They voted down all five company-opposed proposals, including one calling for the board to rescind stock grants and another asking GE to disclose more about the use of animal testing at its healthcare unit. GE competes with some of the world’s largest businesses, including Germany’s Siemens AG, French industrial group Alstom SA and Swiss engineering company ABB Ltd. (Reporting by Scott Malone; Editing by Gerald E. McCormick, Dave Zimmerman) Copyright 2011 Thomson Reuters. Click for Restrictions .

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Chamber Of Commerce President Mocks Demonstrators For Their Insufficient Knowledge Of Complicated Financial Instruments

March 15, 2011

Over at ThinkProgess, Lee Fang relates the reaction U.S. Chamber of Commerce President Tom Donohue gave at being told about a small demonstration that had formed outside a St. Louis event where he was speaking. As you might expect, he didn’t think much of the protesters! Nor did he have many kind words for the similar crowds that have sprung up in Wisconsin, as he criticized public sector workers for their “out of control” pensions and “over bloated” compensation. But this, to me, is the best part. Per CBS’ St. Louis affiliate : While Donohue was inside calling for more deregulation, demonstrator Johnathan McFarland was outside calling for more regulations on business and banking, “We came to where we are at right now, because of the lack of government regulation and we need to put safeguards on things like derivatives.” When a reporter informed U.S. Chamber of Commerce President and CEO Tom Donohue that protestors were planning to demonstrate against his visit to St. Louis, he questioned their intelligence. “Do you think they even know what a derivative is?” Donohue said. Oh, my. Well, I’ll be honest with you, derivatives are a complicated thing to understand. And it’s been made more complicated with the rise of ornate, synthetic derivatives that have taken the derivatives market well beyond old-school agricultural futures. Synthetic derivatives, credit-default swaps, collateralized debt obligations…these are things that happened to the lives of ordinary people while they were putting out fires and running the Department of Motor Vehicles and teaching children about fractions. I can imagine most ordinary people do not have an understanding about these instruments. (Previously, with the help of Julie Satow, I took a stab at explaining part of this complicated puzzle .) But the difference between Tom Donohue and myself is that I do not have contempt for people who lack an understanding of this material. What makes his line hysterical to me, of course, is that there’s ample evidence — you know, in the form of a massive financial crisis — that the people tasked with understanding derivatives didn’t know much about them, either. If you’ve got the desire to learn more, I recommend purchasing John Lanchester’s book I.O.U.: Why Everyone Owes Everyone And No One Can Pay , one of the best books about the financial crisis because it’s written for ordinary people, for whom Lanchester also has no contempt. Here is a relevant selection: In an ideal world, one populated by vegetarians, Esperanto speakers, and fluffy bunny wabbits, derivatives would be used for one thing only: to reduce risk. Because they are bought “on margin” — that is, not for the full cost of the underlying asset but for the advance premium…they offer a cheap and flexible form of insurance against things going wrong. Imagine, for instance, that you are convinced that the stock market will go up by 50 percent in the next year. You know it in your waters — so much so that you borrow $100,000 and use it to buy shares. If the market goes up, you’ll be pleased with yourself; but if you’re wrong and the market plunges, you’ll be badly out of pocket — unless you take out some insurance. So you buy a $10,000 option to sell shares at a lower price than you paid for them. That money is wasted if your shares go up — but you wont’ care much because your main position is in serious profit. But if shares go down, you have some insurance — you can cash in the option to sell shares at the lower price and eliminate most of your losses. This is called “hedging”: you have used an option to hedge your main risk. Alas, we don’t live in that kinder, gentler world. In reality, the power of derivatives has a way of proving irresistible for those people who aren’t just sure that the market is going up, but who are beyond sure, are supersure, are possessed of absolute knowledge. Financial experts are often possessed of this kind of certainty. In that event, it is very tempting indeed to buy an option that increases your level of risk, in the certainty that this will increase your level of reward. In the above example, instead of hedging the position with an option to sell, you could magnify it with options to buy, which will be worth a lot if you’re right – sorry, when you’re right. When you’re right and the market goes up by half, your $10,000 option will be worth $50,000 (that’s the $50,000 by which the shares have gone up). In fact, instead of buying $100,000 of shares and a $10,000 option to buy, why not instead buy $100,000 worth of options? This is called leverage: you have leveraged your $100,000 to buy $1,000,000 worth of exposure to the market. That way, when you get your price rise, you have just made $500,000, and all with borrowed money. In fact, why not skip the option and instead buy some futures, which are cheaper (because riskier) – let’s say half the price? These futures, at $5,000 each, oblige you to buy 20 lots of the shares for $100,000 each in a year’s time. Hooray! You’re rich! Unless the market, instead of doubling, halves, and you are saddled with an obligation to buy $2 million worth of shares that are now worth only $1 million. You’ve just borrowed $100,000 and through the power of modern financial instruments used it to lose $1 million. Whoops. It might seem unlikely that anyone would do anything that stupid, but in practice it happens all the time. And, circa fall of 2008, this stupidity occurred on a massive scale, and if you might recall, you folks paid a pretty penny to put things right. So, yeah, y’all might be too stupid, in Tom Donohue’s estimation, to understand the complexities of the financial markets, but when the sage geniuses who supposedly do nearly destroy the economy and send a pile of untold wealth straight to money heaven, paying to patch over the collossal cock-up becomes your responsibility. Were you thanked for this, by the way? I guess the “thanks” comes when the remaining holes in the economy are filled by your pensions! By the way, there’s this woman named Elizabeth Warren who is putting together something called the Consumer Financial Protection Board. Her modest goals and desires include changing the way banks do business so that credit card agreements aren’t filled with ” tricks and traps ” that come buried in obtuse language designed to confuse people. Naturally, she’s been opposed at every turn by — guess who? — the U.S. Chamber of Commerce. So, it’s important to remember the ignorance of ordinary people who Tom Donohue mocks is precisely the state in which he hopes ordinary people persist. [Would you like to follow me on Twitter ? Because why not? Also, please send tips to tv@huffingtonpost.com -- learn more about our media monitoring project here .]

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Michael Russnow: Citigroup Continues its Dance With Reverse Splits: The Question Is Why?

March 14, 2011

Citigroup just sent me its annual statement and ballot to vote on suggestions from its Board of Directors, which, among other things, extends its flirtation with a reverse split that began two years ago. For those unaware, a reverse split is the opposite of a split, which is when stock prices get too high and the price might be split in half with each stockholder getting a doubling of shares. When this happens it’s a sign the company is doing well, but because the share price might be too high for a lot of action, halving the price makes it more affordable and shareholders get a chance at continued upward movement with more stock. With a reverse split, a company is in trouble and stockholders lose their shares proportionately to effect a rise in the cost of the stock. So, if you had 1,000 shares of AIG when it split 1:20 in 2009, you wound up with fifty shares, but the price went from $1.15 to $23. Here’s the rub. Everyone knows the new price is artificial and they’re not fooling anyone. It’s a sign of desperation, which in AIG’s case was calculated to prevent the stock from tumbling below a dollar and getting delisted from the New York Stock Exchange. Citi itself was in that ballpark two years ago for a short period. However, the stock moved up remarkably since then and hasn’t sold below three dollars in quite awhile. It’s been over four dollars mostly and occasionally has gone over five. So, since it’s in no danger of delisting, why even talk about giving the company a bad mark? The Directors’ statement insists they merely want to “extend their right” to do a reverse split in seven possible combinations: 1:2, 1:5, 1:10, 1:15,1:20, 1:25 and 1:30, but may well not as they haven’t since they received shareholder authorization to do so in 2009. They explain the upside is that by decreasing the number of shares it would reduce fees on the NYSE. They also warn that in the unlikely development the reverse split vote fails they will still have the right to do so for two months under the approval attained in last year’s shareholder vote. And of course they remind us the inflated share prices might not stay anywhere near the new level, and that’s what worries me. When AIG did its split, it was $23 for a day or so, and went down to $18 and in short order sold at $9, or the equivalent of 45 cents before the reverse split happened. This was due to short trading, when people bet against a stock’s value and borrow “x” number of shares that they sell at the higher price, hoping it falls markedly so they can buy it low and return the shares they borrowed at a profit. That’s what happened with AIG, and what makes the geniuses at Citi think it won’t happen with their stock? Another reason Citi says reverse splitting might be good is because many institutions forbid purchasing stock below $5, and a higher price would stimulate buying and presumably cause the stock price to move upward. Except Citi is already a favorite of hedge funds and usually trades in large volumes. But even more significant is that Citi’s relative stagnant movement has been matched by most of the other financial institutions, which sell at prices significantly higher than $5. Bank of America, which hovers between $10 and $18, goes up and down at the same level as Citi. So does Wells Fargo, trading between the high twenties and low thirties. Also, Goldman Sachs, back and forth between $140 and $180. Mostly, when they go up Citi goes up and when they go down Citi drops, so why would the Board believe its price fluctuation percentages would be better if it sold at a higher price? More likely there’d be an immediate stigma against Citi, with a drastically lower price effected after a reverse split as AIG suffered. And even if it eventually came back, as AIG did after a year or so, rising to $62 a few months ago, you have to realize that in pre-reverse split figures (1:20) it really only “recovered” to a price of a little more than $3 after having tumbled to 38 cents from a pre-reverse split high of $70 a few years ago. And where is AIG today? It sold for $37.35 on Friday ($1.87 in pre-reverse split numbers), partially due to issuing warrants in early January that lowered its price over $8 in one day to cover the company’s granting shareholders .53 of a warrant per number of shares owned. Each warrant had an opening value of approximately fifteen dollars and permitted holders to buy a share for $45 over a ten year period. Just before warrants were issued AIG was $54, but it quickly fell below $45. For the moment the warrants aren’t such a great deal vis-à-vis the share price plummeting to the mid-thirty range, and while the quote may eventually go up I’m glad I got out at $52.75, a profit of 126%. So, I don’t know why Citi, with no danger of delisting and with its price ups and downs approximating the percentages of other major banks which sell well above five dollars, wants to mess with its public image and risk luring the short-players to wreak havoc on the stock’s price? Why not be patient and do a good job and instill confidence in the company, moving past five dollars and upward the old fashioned way by just earning it? That’s what I’d suggest, and I don’t pretend I’m any sort of expert, but I can read and I see what the other financial stocks are doing, and what “success” AIG had with its reverse-split. Leave it alone, Citi, please. Michael Russnow’s website is ramproductionsinternational.com

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European Shares Close Higher after Earnings

February 16, 2011

European Shares Close Higher after Earnings

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L’Oreal Shares slumps after earnings miss estimates

February 11, 2011

L’Oreal Shares slumps after earnings miss estimates

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Apple Pushed To Reveal CEO Succession Plan

February 3, 2011

WASHINGTON — Proxy advisory firm Institutional Shareholder Services is backing a shareholders proposal that would require Apple Inc. to divulge its succession plans. The proposal was submitted to Apple by the Central Laborers’ Pension Fund in August. The fund owns nearly 11,500 shares, about a thousandth of 1 percent of the shares outstanding. The proposal is on the agenda for the shareholders meeting on Feb. 23. Word of ISS’s backing on Thursday comes two weeks after Apple CEO Steve Jobs announced he was taking his third medical leave since founding the company in 1976. Apple’s board recommends voting against the plan, saying it already has a succession plan in place, and that to reveal who it was considering for advancement could prompt rivals to poach its executives and cause others to leave.

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European Shares Jump the Most in Two Months

February 1, 2011

European Shares Jump the Most in Two Months

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LinkedIn Files For IPO

January 27, 2011

Developing: More information to come. LinkedIn has just filed for its IPO. As TechCrunch initially reported, and the company’s official blog confirmed, the business networking site has just submitted an S-1 filing with the SEC. The maximum proposed offering priced is $175 million, though the amount is sure to change. Private trading exchange SharesPost indicates LinkedIn’s implied value is $2.5 billion. The company reported revenue of $161.4 million in the first nine months of 2010. Number of shares to be sold and price range have not yet been decided. While some of the shares will be issued for sale, others will be sold by stockholders of the company. Morgan Stanley, Bank of America, Merrill Lynch and J.P. Morgan will act as the bookkeeping managers.

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GM’s IPO Just Got More Expensive

November 16, 2010

DETROIT — A confident General Motors has added 20 million shares of preferred stock to its initial public offering, and it raised the estimated price range for common shares by about 14 percent to $32 to $33. The Detroit automaker, just 16 months out of bankruptcy protection, will now sell 80 million shares of preferred stock for $50 each when its offering takes place on Thursday. Common shares will be sold by the U.S. government and two other owners, who inherited the stock for helping GM get through a painful restructuring last year. GM announced the changes in a statement issued Tuesday morning. The automaker gave no reason for the increases, but people briefed on the sale say it’s because of high investor demand. One person said bankers handling the sale had seven times more orders for the common stock than shares. Earlier this month, GM said its owners will sell 365 million common shares for $26 to $29 each. GM also planned to sell 60 million preferred shares for $50 each. The increase in preferred shares lifts the amount GM will raise in the sale from $3 billion to $4 billion, according to the statement. Final pricing is to be set Wednesday, and bankers may stop taking orders for the shares as early as Tuesday afternoon, according to the person, who asked not to be identified because he is not authorized to speak publicly about the sale. GM and its owners could sell even more preferred and common shares in the offering. Bankers have yet to exercise an option to sell 15 percent more of the shares due to high demand. The preferred stock price will stay at $50, but GM’s total cost for those shares will remain about the same because it’s reducing the expected dividend rate from a range of 5.5 to 6 percent to between 4.75 and 5.25 percent, the person said. The preferred shares will be converted to common stock in 2013. Bankers have the option to sell roughly 55 million more common shares, although they have not yet decided to do that, the person said. The common stock price increase is a boon for the U.S. government, which is GM’s largest stockholder. The government is trying to get back the $50 billion it gave the company last year to get through bankruptcy protection. Other owners selling stock are the Canadian and Ontario governments and a union health care trust fund. Demand for the automaker’s shares is rising as its financial outlook improves. Last week, GM announced a third-quarter profit of $2 billion, bringing its earnings to a healthy $4.2 billion for the year. In presentations to investors, GM said its debt and labor costs have been cut so much that it can break even at the low point in an auto sales slump. When sales fully recover, the company said it could make $17 billion to $19 billion per year before taxes. The price hike comes during a week that could be the biggest for IPOs since 2007, according to investment adviser Renaissance Capital LLC. The IPO market has improved steadily since August 2009. The sector had been almost frozen for nearly a year after massive losses on mortgage bonds upended global credit markets.

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Video: Smith Says Average Facebook Share Trade Is $2 Million: Video

October 11, 2010

Oct. 11 (Bloomberg) — Jeremy Smith, chief strategy officer at SecondMarket Inc., talks about private sales of Facebook Inc. and Zynga Game Network Inc. shares. Smith also discusses the companies’ imposition of fees of at least $2,500 for each sale of their shares. He talks with Carol Massar and Matt Miller on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)

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Dan Dorfman: Bad Guys Ballooning on Wall Street

September 17, 2010

Wall Street’s bad guys continue to multiply even though their idol, Bernie Madoff, currently serving a 150-year jail term, would be the first guy to tell them that crime doesn’t pay. Indicative of this accelerating bad guys trend is the stepped-up number of insider trading probes by two of Wall Street’s leading regulators on the securities beat — the Securities and Exchange Commission (SEC) and the Financial Independent Regulatory Authority (FINRA), which oversees nearly 4,700 brokerage firms. Both, I’ve learned, have recently kicked off investigations into the stock trading of a trio of prominent companies prior to their receiving well publicized buyout offers in recent months totaling about $58.5 billion. These fresh, unreported investigations center on what one aspect of Wall Street killings — the illegal kind — are all about. In brief, you buy a stock and you’re lucky. Some firm steps in and makes a bid for the company at a sizable premium to the existing share price and you reap a big gain as the price of the shares balloon. Then again, maybe you weren’t so lucky. Maybe it was a sure thing transaction. Maybe you bought the stock after obtaining privileged, non-public information, which is precisely what Gordon Gekko did before winding up in jail. That’s basically what the SEC and FINRA are looking into with regard to the three takeover offers in question. They involve: –The $38.6 billion hostile bid by Australian-based BHP Billton, the world’s largest mining company, to acquire Canada’s Potash Corp., the globe’s biggest fertilizer supplier. The bid was rejected. –An $18.5 billion offer by French drug maker Sanofi-Aventis to buy Genzyme Corp., a leading U.S. biotech company. That bid was also rejected. –A $1.2 billion offer by Hertz Corp., later raised to $1.43 billion, to acquire a rival in the rent-a-car business, Dollar Thrifty Automotive. It’s all very legal, of course, to buy the shares of a takeover candidate, but not if you have precise knowledge of an impending buyout offer that has not been publicly disclosed. That’s not playing the game on the up and up. If you’re caught cheating — namely, illegally trading on inside information — you can, as you well know, get hit with a hefty fine, join Madoff and Gekko in the clink, or both. With the mergers and acquisitions game heating up, thanks to low interest rates, strengthened balance sheets, a desire by companies to beef up their growth prospects in a weak economic environment and pent-up efforts by overseas corporations to crack the U.S. market, the opportunities to beat the system with inside knowledge of non-publicly announced deals have become much greater. Apparently suspicious that some unethical trading may indeed have taken place in the shares of Potash, Genzyme and Dollar Thrifty Automotive, the SEC and FINRA in recent weeks sent out inquiries to the brokerage community in which they specifically requested the names of any clients who traded in these securities both in domestic and foreign markets in specific time periods. It’s unclear whether any of the investigations mentioned here extend beyond the trading in the companies’ securities. Both agencies declined comment, but I have obtained copies of internal SEC and FINRA documents from a regulatory contact that detail the three investigations. In addition, both agencies recently initiated a number of other stock trading investigations, with energy companies particularly conspicuous. Again, I have gotten my mitts on copies of regulatory documents detailing these investigations. Included here are SEC probes into such stocks as Valero Energy, Hess Corp., Adobe Systems, Transocean, Ltd., Occidental Petroleum, Valeant Pharmaceuticals International, Annaly Capital Management, Lennar Corp., Hewitt Associates, Americredit Corp., BMC Software, Halliburton, Cameron International and Las Vegas Sands. Meanwhile, FINRA, the documents show, is probing the trading in such stocks as Priceline.com, BJ’s Wholesale Club, Atlas Pipeline Partners, L.P., Prospect Medical Holdings and DigitalGlobe. What does it all mean? That insider trading is far from dead and the securities industry’s cops monitoring the Wall Street beat probably need more handcuffs. I don’t want to sound like a broken record, but about a year ago I wrote a similar kind of piece on stock trading investigations and tried to explain why there are so many bad guys on Wall Street. One answer — “Because our product is money and money attracts scum” — was given to me then by Malcolm Lowenthal, a stockbroker at Kern Suslow Securities. That covers it all. What do you think? E-mail me at Dandordan@aol.com .

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China’s Agricultural Bank Now The World’s Largest IPO

August 16, 2010

SHANGHAI — The Agricultural Bank of China says it raised a world record $22.1 billion in its initial public offering last month, despite a tepid reception from investors, after exercising an overallotment option for its Shanghai share sale. The bank, China’s main rural lender, sold an additional 3.34 billion shares at the IPO price of 2.68 yuan ($0.39) per share as part of the overallotment, as expected, according to a notice Monday on the Web site of the Hong Kong Stock Exchange. The extra 8.94 billion yuan ($1.3 billion) raised pushed the dual Hong Kong-Shanghai IPO to $22.1 billion in total, surpassing the previous record set by the Industrial & Commercial Bank of China’s $21.9 billion IPO in 2006. Despite strong government backing for the IPO, the last by China’s four biggest state-owned commercial banks, investors leery of the rural-oriented balance sheet and the market’s overall outlook have shown lackluster interest in the shares. In Hong Kong, whose market is open to foreign investors, the bank’s shares rose a mere 2.2 percent on their July 16 debut, compared with double-digit gains in past years for high-profile IPOs. In Shanghai, where yuan-denominated shares are sold only to domestic buyers, the shares rose just 1 percent on their debut. By midday Monday, the lender’s shares were up 0.7 percent, at 2.71 yuan in Shanghai and down 1.5 percent, at 3.34 Hong Kong dollars a share, in Hong Kong.

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Franklin Wireless Announces Repurchase of Stock From C-Motech

August 2, 2010

Company to Buy Back All of C-Motech’s Shares; C-Motech to Give up Board Position

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Dan Dorfman: SEC Eyes $12 Billion of M&A Deals

August 1, 2010

Call it business as usual on Wall Street. In this case, that’s monkey business. Here’s the story. With corporate coffers brimming with cash, borrowing costs puny because of near zero interest rates and companies hungry for growth opportunities in a sluggish economic environment, merger and acquisition activity is percolating again. So, too, is the pace of stock trading investigations by the Securities and Exchange Commission into such transactions. In this context, the SEC, I’ve learned, is looking into the trading that took place in the shares of five companies involved in four multibillion deals — $12 billion all told — that took place this year prior to the official announcements of these transactions. The thrust: To determine, I’m told, whether anyone illegally traded on non-public, inside information. The five M&A deals involve the following transactions: –Continental Airlines’ $3 billion merger with United Airlines. –The $2 billion acquisition of Brink’s Security Holdings by Tyco International. –The $5.8 billion takeover of Sybase by SAP AG, a German business software company. –The $1.2 billion buyout of Palm by Hewlett Packard. The five companies whose trading is under SEC scrutiny are Continental Airlines, Brinks, Sybase, Palm and Hewlett Packard. Whether these investigations are based on any specific knowledge or suspicions of wrongdoing or whether the SEC is simply fishing is unclear, but some regulatory contacts strongly suggest the former. “The commission doesn’t commence investigations based on maybes or guesswork,” one former SEC enforcement attorney told me. The SEC, adhering to its usual policy, declined to discuss the matter. “We don’t confirm or deny investigations,” an agency spokesman, John Heine, said. However, the names of the five companies are disclosed in copies of internal SEC documents that the commission recently sent to the brokerage community in which it requested the names of the clients who traded in the shares in specific time periods. A regulatory source provided me with copies of these documents. In addition to the five companies mentioned above whose trading is being investigated, the SEC recently sent out a bunch of brokerage inquiries involving a number of other companies whose trading is being probed. In some cases, the inquiries to brokerage firms may represent the agency’s quest for additional trading information. Included in these additional trading investigations are some of the best known names in Corporate America. Among them are Tiffany & Co., JP Morgan Chase, Intel, Micron Technology, Federal National Mortgage Association (Fannie Mae), DirecTV and SPDR Gold Trust, one of the country’s leading exchange-traded gold funds. Also the focus of trading probes — all of which are detailed in additional copies of SEC documents in my possession — are Salesforce.com, Thomas Weisel Partners Group, Dollar Thrifty Automotive, Interactive Data, Taiwan Semiconductor Manufacturing Co., Mariner Energy, Fidelity National Information Services, Biovail Corp. and Psychiatric Solutions. Commenting on these assorted investigations, a compliance official at one large brokerage observed: “Maybe one of these days Wall Street will get the message that the regulatory climate has changed in this post-Madoff era, that it’s preferable to live at home rather than in jail.” What do you think? E-mail me at Dandordan@aol.com

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Treasury Makes $10.5 Billion From Sale Of Citigroup Shares

July 1, 2010

WASHINGTON — The Treasury Department said Thursday it has raised $10.5 billion from the sale of a total of 2.6 billion shares of Citigroup stock it received as part of the government’s rescue of the bank. The government sold the shares at a profit as it seeks to recoup the costs of the $700 billion financial bailout in 2008. Treasury says the latest sale of 1.1 billion shares, which figures into the total, completes its second phase of selling operations. In the latest Citigroup sale, the stock sold for an average price per sale of around $4.03, Treasury said. That would represent a profit form the $3.25 price Treasury paid to obtain the shares. Citigroup’s shares slipped 8 cents to $3.68 in morning trading Thursday. The government still owns 5.1 billion shares of Citigroup stock and expects to continue selling shares at a future date. Citigroup, hard hit by the financial crisis, received $45 billion in taxpayer-funded bailout money. That was one of the largest bank rescues by the government. Of the $45 billion, $25 billion was converted to a government ownership stake. The bank repaid the other $20 billion in December. “We are pleased that Treasury has profitably sold a third of its common shares in Citi, adding to the substantial return for taxpayers realized last year,” said Jon Diat, a spokesman for Citigroup. The government’s bailouts of banks and insurance giant American International Group Inc. has touched a nerve with the American public – and by extension – lawmakers on Capitol Hill. Ordinary people have been incensed that taxpayer money has helped banks, while so many Americans are struggling under near double-digit unemployment, soaring home foreclosures and lackluster wage gains. Treasury Secretary Timothy Geithner told a watchdog panel last week that that banks have repaid about 75 percent of the bailout money they received. The government’s investments in aided banks have brought taxpayers $21 billion, he said. At the same time, Geithner acknowledged there likely will be a partial loss from the rescue of giant insurer American International Group Inc., into which the government plowed $182 billion. Geithner also said the auto industry has made significant structural changes, and the prospects that General Motors and Chrysler will repay the nearly $60 billion in bailout money have improved.

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BP Rebounds on Agreement to Phase Oil Spill Payments

June 17, 2010

By Eduard Gismatullin June 17 (Bloomberg) — BP Plc rebounded in London trading and the cost of insuring the company against default tumbled after an agreement to phase in payments to a $20 billion fund to compensate victims of the worst oil spill in U.S. history. BP scrapped dividends and pledged asset sales yesterday to meet President Barack Obama ’s demand to set up the fund in response to the Gulf of Mexico oil spill. Its shares have slumped 45 percent since the Deepwater Horizon rig exploded on April 20, wiping about 55 billion pounds ($81 billion) off the London-based company’s value. “It brings some clarity, but obviously we still don’t know whether $20 billion will be enough or whether the company will need more,” said Colin Morton , who helps manage about $1.7 billion at Rensburg Fund Management in Leeds, England. “If this is the final cost, it’s more than adequately reflected in the price.” Chief Executive Officer Tony Hayward told Congress today that he was “deeply sorry” for the explosion and spill. BP’s Chairman Carl-Henric Svanberg agreed on payments over four years to finance an independent body that will settle claims resulting from the damaged oil well after a meeting with Obama at the White House yesterday. BP jumped 6.7 percent to 359.70 pence in London after earlier rising as much as 9.7 percent, the biggest intraday gain since November 2008. The shares fell 1.5 percent yesterday to 337 pence, the lowest since April 1997. Halting the dividend , reducing investments in drilling and selling oil and gas fields will do enough to ensure the company’s financial stability, Chief Financial Officer Byron Grote said yesterday. Provides Comfort The deal to phase payments into the fund “allows us to stage our injections in a way that I hope now provides comfort to debt and equity markets,” Grote said. BP had faced increased pressure from U.S. lawmakers to settle damage claims and suspend the dividend in the run-up to yesterday’s meeting at the White House. “A line has been drawn,” said Manoj Ladwa , a London-based senior trader at ETX Capital. “It’s likely that we are going to see less of the aggressive rhetoric that we saw out of the U.S. administration going forward.” The agreement to cut three quarters of dividend payments and set up the fund removed BP from a four-hour stint among companies the bond market labels distressed. Bonds, Swaps BP’s bonds rose, with the spread on its 1 billion euros of 4.5 percent notes due November 2012 narrowing to 538 basis points from 696 basis points yesterday, according to HSBC Holdings Plc prices on Bloomberg. The yield premium on the 500 million pounds of 4 percent bonds due December 2014 was at 360 basis points, from 411 basis points. The company’s bonds were the most active in U.S. trading yesterday. BP’s $750 million of 1.55 percent notes maturing in 2011 fell 0.125 cent to 94.375 cents on the dollar after jumping 2.25 cents yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The cost of protecting BP’s debt against default for one year fell 344 basis points to 653, after climbing as high as 1,075 yesterday, CMA DataVision prices show. Too Far “A more normal political atmosphere and measures to address debt concerns will emphasize that the shares have sold off too far,” Jon Rigby , an analyst at UBS AG, wrote in a note to clients. UBS cut its price target on the shares by 10 percent to 525 pence. BP will raise $10 billion this year selling assets, Grote said in his call with investors, concentrating on oil and gas fields that aren’t central to the company’s business. Share gains may be limited after Obama said the fund won’t cap BP’s liability for cleanup costs or supersede the rights of individuals or states to sue the company. “There seems to be some relief in the United States, but I’m not so sure about some investors, particularly the income funds, will be quite so sanguine about this,” said Peter Hutton , a London-based analyst at NCB Stockbrokers Ltd. BP has spent about $1.6 billion on containing and cleaning up the spill so far. The company’s spending for cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week. Increased Estimate The U.S. government this week increased its estimate of the oil leak to 35,000 to 60,000 barrels a day. “Even if the final cost totals $40 billion and BP is liable for 100 percent, the shares look oversold,” Richard Griffith , a London-based analyst at Evolution Securities Ltd., wrote in a report. Still, he urged caution about buying the shares until after the so-called relief wells BP is drilling to plug the bottom of the damaged well are completed in August. BP captured 18,600 barrels of oil from the leaking well yesterday, the most since the spill began, according to its website. To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net .

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BP Rebounds After Scrapping Dividend in Deal to Pay for Spill Swaps Slide

June 17, 2010

By Eduard Gismatullin June 17 (Bloomberg) — BP Plc rebounded the most in 19 months and the cost of insuring the company against default fell after an agreement to phase in payments to a $20 billion fund to compensate victims of the worst oil spill in U.S. history. BP scrapped dividends and pledged asset sales yesterday to meet President Barack Obama ’s demand to set up the fund in response to the Gulf of Mexico oil spill. Its shares have slumped 45 percent since the Deepwater Horizon rig exploded on April 20, wiping about 55 billion pounds ($80 billion) off the London-based company’s value. “It brings some clarity, but obviously we still don’t know whether $20 billion will be enough or whether the company will need more,” said Colin Morton , who helps manage about $1.7 billion at Rensburg Fund Management in Leeds, England. “If this is the final cost, it’s more than adequately reflected in the price.” Chief Executive Officer Tony Hayward , who will testify before Congress today, said in prepared testimony that he was “deeply sorry” for the explosion and spill. BP’s Chairman Carl-Henric Svanberg agreed on payments over four years to finance an independent body that will settle claims resulting from the damaged oil well after a meeting with Obama at the White House yesterday. BP jumped as much as 9.7 percent, the biggest intraday gain since November 2008, and traded at 361.25 pence as of 10:22 a.m. in London. The shares fell 1.5 percent yesterday to 337 pence, the lowest since April 1997. Halting the dividend , reducing investments in drilling and selling oil and gas fields will do enough to ensure the company’s financial stability, Chief Financial Officer Byron Grote said yesterday. Provides Comfort The deal to phase payments into the fund “allows us to stage our injections in a way that I hope now provides comfort to debt and equity markets,” Grote said. BP had faced increased pressure from U.S. lawmakers to settle damage claims and suspend the dividend in the run-up to yesterday’s meeting at the White House. “A line has been drawn,” said Manoj Ladwa , a London-based senior trader at ETX Capital. “It’s likely that we are going to see less of the aggressive rhetoric that we saw out of the U.S. administration going forward.” The agreement to cut three quarters of dividend payments and set up the fund removed BP from a four-hour stint among companies the bond market labels distressed. BP’s bonds rose, with the spread on its 1 billion euros of 4.5 percent notes due November 2012 narrowing to 555 basis points from 696 basis points yesterday, according to HSBC Holdings Plc prices on Bloomberg. The yield premium on the 500 million pounds of 4 percent bonds due December 2014 was at 410 basis points, from 411 basis points. Bonds, Swaps The company’s bonds were the most active in U.S. trading yesterday. BP’s $750 million of 1.55 percent notes maturing in 2011 increased 2.25 cents to 94.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The cost of protecting BP’s debt against default for one year fell 461.5 basis points to 535.5, after climbing as high as 1,075 yesterday, CMA DataVision prices show. BP’s American depositary receipts reversed losses after the White House deal was announced to close up 45 cents, or 1.4 percent, at $31.85 in New York yesterday. “A more normal political atmosphere and measures to address debt concerns will emphasize that the shares have sold off too far,” Jon Rigby , an analyst at UBS AG, wrote in a note to clients. UBS cut its price target on the shares by 10 percent to 525 pence. Low Point BP will raise $10 billion this year selling assets, Grote said in his call with investors, concentrating on oil and gas fields that aren’t central to the company’s business. Share gains may be limited after Obama said the fund won’t cap BP’s liability for cleanup costs or supersede the rights of individuals or states to sue the company. “There seems to be some relief in the United States, but I’m not so sure about some investors, particularly the income funds, will be quite so sanguine about this,” said Peter Hutton , a London-based analyst at NCB Stockbrokers Ltd. BP has spent about $1.6 billion on containing and cleaning up the spill so far. The company’s spending for cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week. The U.S. government this week increased its estimate of the oil leak to 35,000 to 60,000 barrels a day. “Even if the final cost totals $40 billion and BP is liable for 100 percent, the shares look oversold,” Richard Griffith , a London-based analyst at Evolution Securities Ltd., wrote in a report. Still, he urged caution about buying the shares until after the so-called relief wells BP is drilling to plug the bottom of the damaged well are completed in August. To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net .

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BP Rebounds After Scrapping Dividend in Deal to Pay for Spill Swaps Slide

June 17, 2010

By Eduard Gismatullin June 17 (Bloomberg) — BP Plc rebounded the most in 19 months and the cost of insuring the company against default fell after an agreement to phase in payments to a $20 billion fund to compensate victims of the worst oil spill in U.S. history. BP scrapped dividends and pledged asset sales yesterday to meet President Barack Obama ’s demand to set up the fund in response to the Gulf of Mexico oil spill. Its shares have slumped 45 percent since the Deepwater Horizon rig exploded on April 20, wiping about 55 billion pounds ($80 billion) off the London-based company’s value. “It brings some clarity, but obviously we still don’t know whether $20 billion will be enough or whether the company will need more,” said Colin Morton , who helps manage about $1.7 billion at Rensburg Fund Management in Leeds, England. “If this is the final cost, it’s more than adequately reflected in the price.” Chief Executive Officer Tony Hayward , who will testify before Congress today, said in prepared testimony that he was “deeply sorry” for the explosion and spill. BP’s Chairman Carl-Henric Svanberg agreed on payments over four years to finance an independent body that will settle claims resulting from the damaged oil well after a meeting with Obama at the White House yesterday. BP jumped as much as 9.7 percent, the biggest intraday gain since November 2008, and traded at 361.25 pence as of 10:22 a.m. in London. The shares fell 1.5 percent yesterday to 337 pence, the lowest since April 1997. Halting the dividend , reducing investments in drilling and selling oil and gas fields will do enough to ensure the company’s financial stability, Chief Financial Officer Byron Grote said yesterday. Provides Comfort The deal to phase payments into the fund “allows us to stage our injections in a way that I hope now provides comfort to debt and equity markets,” Grote said. BP had faced increased pressure from U.S. lawmakers to settle damage claims and suspend the dividend in the run-up to yesterday’s meeting at the White House. “A line has been drawn,” said Manoj Ladwa , a London-based senior trader at ETX Capital. “It’s likely that we are going to see less of the aggressive rhetoric that we saw out of the U.S. administration going forward.” The agreement to cut three quarters of dividend payments and set up the fund removed BP from a four-hour stint among companies the bond market labels distressed. BP’s bonds rose, with the spread on its 1 billion euros of 4.5 percent notes due November 2012 narrowing to 555 basis points from 696 basis points yesterday, according to HSBC Holdings Plc prices on Bloomberg. The yield premium on the 500 million pounds of 4 percent bonds due December 2014 was at 410 basis points, from 411 basis points. Bonds, Swaps The company’s bonds were the most active in U.S. trading yesterday. BP’s $750 million of 1.55 percent notes maturing in 2011 increased 2.25 cents to 94.5 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The cost of protecting BP’s debt against default for one year fell 461.5 basis points to 535.5, after climbing as high as 1,075 yesterday, CMA DataVision prices show. BP’s American depositary receipts reversed losses after the White House deal was announced to close up 45 cents, or 1.4 percent, at $31.85 in New York yesterday. “A more normal political atmosphere and measures to address debt concerns will emphasize that the shares have sold off too far,” Jon Rigby , an analyst at UBS AG, wrote in a note to clients. UBS cut its price target on the shares by 10 percent to 525 pence. Low Point BP will raise $10 billion this year selling assets, Grote said in his call with investors, concentrating on oil and gas fields that aren’t central to the company’s business. Share gains may be limited after Obama said the fund won’t cap BP’s liability for cleanup costs or supersede the rights of individuals or states to sue the company. “There seems to be some relief in the United States, but I’m not so sure about some investors, particularly the income funds, will be quite so sanguine about this,” said Peter Hutton , a London-based analyst at NCB Stockbrokers Ltd. BP has spent about $1.6 billion on containing and cleaning up the spill so far. The company’s spending for cleanup and liabilities may reach $40 billion, Standard Chartered Plc estimated last week. The U.S. government this week increased its estimate of the oil leak to 35,000 to 60,000 barrels a day. “Even if the final cost totals $40 billion and BP is liable for 100 percent, the shares look oversold,” Richard Griffith , a London-based analyst at Evolution Securities Ltd., wrote in a report. Still, he urged caution about buying the shares until after the so-called relief wells BP is drilling to plug the bottom of the damaged well are completed in August. To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net .

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U.S. Stock-Index Futures Drop Before Reports on Home Building, Production

June 16, 2010

By Adam Haigh June 16 (Bloomberg) — U.S. stock-index futures dropped, indicating the Standard & Poor’s 500 Index will retreat from a four-week high, before reports on home construction and industrial production. International Game Technology, a maker of computerized casino gaming systems, declined 1.9 percent in German trading after Goldman Sachs Group Inc. advised clients to sell the shares. Coca-Cola Enterprises Inc. dropped 1.2 percent after the world’s largest soft-drink bottler updated shareholders on its earnings forecast. Futures on the S&P 500 expiring in September lost 0.4 percent to 1,104.5 as of 10:07 a.m. in London. Dow Jones Industrial Average futures declined 0.3 percent to 10,299 and Nasdaq-100 Index futures retreated 0.4 percent to 1,885.25. The S&P 500 rallied 2.4 percent yesterday to 1,115.23, the highest close since May 18. The advance sent the index about 6.5 points above its average level in the past 200 days, a move considered significant by investors who base trading decisions on chart patterns. The gauge tumbled 14 percent from a 19-month high on April 23 through June 7 as concern grew that Europe’s debt crisis will derail the economic recovery and BP Plc’s leaking well in the Gulf of Mexico triggered the worst oil spill in U.S. history. The S&P 500 has since rebounded 6.2 percent as concern over European budget deficits eased and investors speculated growth in China and the U.S. will bolster the global recovery. Industrial Production Industrial production probably increased in May by the most in four months, showing U.S. manufacturers are overcoming the fallout from the European debt crisis, economists said before a Federal Reserve report due at 9:15 a.m. in Washington. Output at factories, mines and utilities rose 0.9 percent in May, the biggest gain since January and the 10th increase in the past 11 months, according to the median estimate of 82 economists surveyed by Bloomberg News. Other reports may show wholesale prices and home construction declined last month. International Game declined 1.9 percent to $19.21 in German trading. Goldman Sachs cut its recommendation on the shares to “sell” from “neutral.” Coca-Cola Enterprises retreated 1.2 percent to $26.18 in Germany. The company said it sees full-year earnings per share increasing 10 to 12 percent in 2010, on a comparable and currency neutral basis. The company had seen 2010 comparable earnings per share up 10 percent excluding currency swings. To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net .

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Mark Cuban Will ‘Most Likely’ Tender Lions Gate Shares To Icahn

June 10, 2010

Found via LA Times , Mark Cuban tells CNBC he’s “most likely going to tender” his shares of Lions Gate to Carl Icahn. Such a move would make Icahn the movie and TV studio’s largest shareholder, and move Icahn closer to taking control of the company.

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Lampert May Avoid Obama Tax Increase With $829 Million Hedge Fund Payout

June 8, 2010

By Miles Weiss June 8 (Bloomberg) — Billionaire Edward Lampert may have found a way to shield himself from millions of dollars in taxes under legislation that would raise levies on profits at private- equity firms. ESL Partners LP, the Greenwich, Connecticut, hedge fund Lampert started more than 20 years ago, and affiliates distributed about $829 million of stock in Sears Holdings Corp. , AutoNation Inc. and AutoZone Inc. to him on June 2, according to regulatory filings. The fund is scheduled to transfer more shares in the retailers to Lampert by the end of July. By taking direct ownership of the shares, Lampert would be taxed at the capital-gains rate of 15 percent when the stock is sold, rather than the ordinary income rate of 39.6 percent that his fund would have to pay under the bill, according to Robert Willens , whose New York-based firm analyzes tax and accounting rules for Wall Street clients. Lampert is ranked 316th on the Forbes list of world’s richest people, with an estimated net worth of $3 billion. “It’s totally an astute thing to do,” Willens said in a telephone interview. “It doesn’t take a fortune teller to predict that we are going to see a lot of this activity between now and the end of the year.” While the legislation is aimed at reducing a tax break for buyout firms, Lampert’s hedge fund often holds investments for more than a year, making it eligible for the lower rate applied to private equity under the current law. Steven Lipin , a spokesman for ESL, declined to comment, and Lampert didn’t return telephone calls and e-mails sent to his office. Sale Restrictions According to last week’s filings with the U.S. Securities and Exchange Commission, Lampert signed an agreement that he can only sell “or otherwise dispose of” the Sears, AutoZone and AutoNation shares he received through the distribution on the same terms and at the same time as ESL Partners. Lampert, 47, may have carried out the distribution for estate-planning purposes, said David Himmelreich, a principal at Hynes, Himmelreich, Glennon & Co., a wealth-management firm in Darien, Connecticut. In January, Lampert disclosed that he had placed Sears, AutoZone and AutoNation shares with a combined market value of $10.3 million in a grantor retained annuity trust, a vehicle that allows people to give large sums to family members under the Internal Revenue Code without paying a gift tax. Sears Acquisition He set up ESL Partners in 1989 and holds an undisclosed stake in the fund through its general partner, RBS Partners LP. Lampert is also the chairman of Hoffman Estates, Illinois-based Sears, which he acquired through an $11.9 billion merger with Kmart Holding Corp. in 2005 to form what now ranks as the nation’s largest department-store chain. The hedge-fund group reported owning stocks with a market value of $12.3 billion as of March 31, with AutoZone, AutoNation and Sears accounting for about $11.4 billion. Holdings included shares of Citigroup Inc., Genworth Financial Inc. and Capital One Financial Corp. In last week’s SEC filings, Lampert described the transfers as “internal restructuring transactions” that will provide him with “direct ownership” of shares he previously held indirectly through the hedge fund. The distribution simultaneously reduces his ownership in the hedge fund, said Lynn Fowler, a partner at the Atlanta law firm Kilpatrick Stockton LLP who specializes in developing tax-efficient business strategies for corporate clients. Carried Interest Tax In January, Lampert’s hedge fund made a similar distribution to him on a smaller scale. In 2004, affiliates of ESL Partners transferred some of their holdings to the hedge fund, while Lampert didn’t personally receive any shares, regulatory filings show. The legislation approved by the House on May 28 would raise taxes on carried interest, or the share of profit paid to managers who run private-equity, venture-capital and real-estate funds. The House had voted three times in three years to raise the levy, only to see the measure stall in the Senate. The Senate may vote this week on the bill, which backers say would help avoid higher federal budget deficits. The Congressional Joint Committee on Taxation estimates that the private-equity provision, known as Section 710, would raise about $17.7 billion in revenue over 10 years. “This may not be the sole reason Lampert did what he did, but it’s entirely probable that it is one reason,” said Stanley Blend, chairman of the law firm Oppenheimer, Blend, Harrison & Tate Inc. in San Antonio and the former head of the tax section at the American Bar Association. “I’m sure that trying to beat the effective date of Section 710 entered into his thought pattern.” Long-Term Holder Private-equity firms pay tax on carried interest at the long-term capital-gains rate because they usually hold investments in buyout targets for at least a year. Hedge funds, which also take about 20 percent of gains as carried interest, have less to lose under the legislation because their profits tend to come from short-term trading, so they are already taxed at ordinary income rates. Lampert’s hedge-fund group is different because it holds stakes in publicly traded companies such as AutoZone for years. AutoNation shares have roughly doubled since ESL Partners and its affiliates reported holding a 23 percent stake in October 2001. Sears has risen fivefold since Lampert filed a Schedule 13D in May 2003 showing that his funds owned 49 percent of Kmart. AutoZone has soared to about $186 a share from $30 since ESL Partners disclosed its stake in June 1999. Stock Distributions According to last week’s SEC filings, ESL Partners distributed 3.79 million Sears shares with a market value of about $299 million to RBS Partners on June 2, which in turn sent 3.72 million of the shares to Lampert and 77,470 to his partner, William Crowley . The partnership and its affiliates distributed about 2.79 million AutoZone shares with a value of almost $520 million and 1.16 million AutoNation shares valued at about $23 million to the two money managers through entities such as RBS Partners, based on June 7 closing prices. Lampert received stock with a combined market value of about $828.9 million, according to the documents. ESL Partners plans to make a second distribution to Lampert and Crowley after obtaining clearance under federal antitrust rules. Under current tax rules, distributions of marketable securities by an investment fund such as ESL Partners to its general partner don’t generate a tax bill, according to Fowler. The general partner can then transfer the Sears, AutoZone and AutoNation stock to its managing members, in this case Lambert and Crowley, who would pay taxes at the capital gains rate if they sold the shares at a profit. ‘Best of Both Worlds’ As of Jan. 1, a similar distribution would be taxed as ordinary income under the pending legislation, a step that Congress is taking to prevent private-equity funds from avoiding the higher rate by transferring appreciated securities to individuals, Fowler said. “Lampert actually gets the best of both worlds,” Fowler said in an interview. “He can maintain the capital-gains treatment and he can also control the timing of when he pays that capital gain.” The move is “a method of having the carried interest distributed out to Mr. Lampert before the effective date of the new legislation,” said Victor Fleischer , the University of Colorado law professor who wrote the 2006 paper “Two and Twenty: Taxing Partnership Profits in Private Equity Funds.” Depending on the method ESL Partners used to allocate carried-interest profits, Lampert may have already paid the levies imposed on such gains, limiting the tax-related benefits from the distribution he received, Fleischer said. To contact the reporter responsible for this story: Miles Weiss in Washington at mweiss@bloomberg.net

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Lampert May Avoid Obama Tax Increase With $864 Million Hedge Fund Payout

June 7, 2010

By Miles Weiss June 8 (Bloomberg) — Billionaire Edward Lampert may have found a way to shield himself from millions of dollars in taxes under legislation that would raise levies on profits at private- equity firms. ESL Partners LP, the Greenwich, Connecticut, hedge fund Lampert started more than 20 years ago, and affiliates distributed about $829 million of stock in Sears Holdings Corp. , AutoNation Inc. and AutoZone Inc. to him on June 2, according to regulatory filings. The fund is scheduled to transfer more shares in the retailers to Lampert by the end of July. By taking direct ownership of the shares, Lampert would be taxed at the capital-gains rate of 15 percent when the stock is sold, rather than the ordinary income rate of 39.6 percent that his fund would have to pay under the bill, according to Robert Willens , whose New York-based firm analyzes tax and accounting rules for Wall Street clients. Lampert is ranked 316th on the Forbes list of world’s richest people, with an estimated net worth of $3 billion. “It’s totally an astute thing to do,” Willens said in a telephone interview. “It doesn’t take a fortune teller to predict that we are going to see a lot of this activity between now and the end of the year.” While the legislation is aimed at reducing a tax break for buyout firms, Lampert’s hedge fund often holds investments for more than a year, making it eligible for the lower rate applied to private equity under the current law. Steven Lipin , a spokesman for ESL, declined to comment, and Lampert didn’t return telephone calls and e-mails sent to his office. Sale Restrictions According to last week’s filings with the U.S. Securities and Exchange Commission, Lampert signed an agreement that he can only sell “or otherwise dispose of” the Sears, AutoZone and AutoNation shares he received through the distribution on the same terms and at the same time as ESL Partners. Lampert, 47, may have carried out the distribution for estate-planning purposes, said David Himmelreich, a principal at Hynes, Himmelreich, Glennon & Co., a wealth-management firm in Darien, Connecticut. In January, Lampert disclosed that he had placed Sears, AutoZone and AutoNation shares with a combined market value of $10.3 million in a grantor retained annuity trust, a vehicle that allows people to give large sums to family members under the Internal Revenue Code without paying a gift tax. Sears Acquisition He set up ESL Partners in 1989 and holds an undisclosed stake in the fund through its general partner, RBS Partners LP. Lampert is also the chairman of Hoffman Estates, Illinois-based Sears, which he acquired through an $11.9 billion merger with Kmart Holding Corp. in 2005 to form what now ranks as the nation’s largest department-store chain. The hedge-fund group reported owning stocks with a market value of $12.3 billion as of March 31, with AutoZone, AutoNation and Sears accounting for about $11.4 billion. Holdings included shares of Citigroup Inc., Genworth Financial Inc. and Capital One Financial Corp. In last week’s SEC filings, Lampert described the transfers as “internal restructuring transactions” that will provide him with “direct ownership” of shares he previously held indirectly through the hedge fund. The distribution simultaneously reduces his ownership in the hedge fund, said Lynn Fowler, a partner at the Atlanta law firm Kilpatrick Stockton LLP who specializes in developing tax-efficient business strategies for corporate clients. Carried Interest Tax In January, Lampert’s hedge fund made a similar distribution to him on a smaller scale. In 2004, affiliates of ESL Partners transferred some of their holdings to the hedge fund, while Lampert didn’t personally receive any shares, regulatory filings show. The legislation approved by the House on May 28 would raise taxes on carried interest, or the share of profit paid to managers who run private-equity, venture-capital and real-estate funds. The House had voted three times in three years to raise the levy, only to see the measure stall in the Senate. The Senate may vote this week on the bill, which backers say would help avoid higher federal budget deficits. The Congressional Joint Committee on Taxation estimates that the private-equity provision, known as Section 710, would raise about $17.7 billion in revenue over 10 years. “This may not be the sole reason Lampert did what he did, but it’s entirely probable that it is one reason,” said Stanley Blend, chairman of the law firm Oppenheimer, Blend, Harrison & Tate Inc. in San Antonio and the former head of the tax section at the American Bar Association. “I’m sure that trying to beat the effective date of Section 710 entered into his thought pattern.” Long-Term Holder Private-equity firms pay tax on carried interest at the long-term capital-gains rate because they usually hold investments in buyout targets for at least a year. Hedge funds, which also take about 20 percent of gains as carried interest, have less to lose under the legislation because their profits tend to come from short-term trading, so they are already taxed at ordinary income rates. Lampert’s hedge-fund group is different because it holds stakes in publicly traded companies such as AutoZone for years. AutoNation shares have roughly doubled since ESL Partners and its affiliates reported holding a 23 percent stake in October 2001. Sears has risen fivefold since Lampert filed a Schedule 13D in May 2003 showing that his funds owned 49 percent of Kmart. AutoZone has soared to about $186 a share from $30 since ESL Partners disclosed its stake in June 1999. Stock Distributions According to last week’s SEC filings, ESL Partners distributed 3.79 million Sears shares with a market value of about $299 million to RBS Partners on June 2, which in turn sent 3.72 million of the shares to Lampert and 77,470 to his partner, William Crowley . The partnership and its affiliates distributed about 2.79 million AutoZone shares with a value of almost $520 million and 1.16 million AutoNation shares valued at about $23 million to the two money managers through entities such as RBS Partners, based on June 7 closing prices. Lampert received stock with a combined market value of about $828.9 million, according to the documents. ESL Partners plans to make a second distribution to Lampert and Crowley after obtaining clearance under federal antitrust rules. Under current tax rules, distributions of marketable securities by an investment fund such as ESL Partners to its general partner don’t generate a tax bill, according to Fowler. The general partner can then transfer the Sears, AutoZone and AutoNation stock to its managing members, in this case Lambert and Crowley, who would pay taxes at the capital gains rate if they sold the shares at a profit. ‘Best of Both Worlds’ As of Jan. 1, a similar distribution would be taxed as ordinary income under the pending legislation, a step that Congress is taking to prevent private-equity funds from avoiding the higher rate by transferring appreciated securities to individuals, Fowler said. “Lampert actually gets the best of both worlds,” Fowler said in an interview. “He can maintain the capital-gains treatment and he can also control the timing of when he pays that capital gain.” The move is “a method of having the carried interest distributed out to Mr. Lampert before the effective date of the new legislation,” said Victor Fleischer , the University of Colorado law professor who wrote the 2006 paper “Two and Twenty: Taxing Partnership Profits in Private Equity Funds.” Depending on the method ESL Partners used to allocate carried-interest profits, Lampert may have already paid the levies imposed on such gains, limiting the tax-related benefits from the distribution he received, Fleischer said. To contact the reporter responsible for this story: Miles Weiss in Washington at mweiss@bloomberg.net

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Gerdau Proposes to Purchase Rest of Ameristeel for as Much as $1.7 Billion

June 2, 2010

By Dale Crofts June 2 (Bloomberg) — Gerdau SA, the largest Brazilian steelmaker, plans to buy the shares it doesn’t already own of unit Gerdau Ameristeel Corp. for about $1.7 billion as it seeks greater control over its U.S. operations. The company, based in Porto Alegre, will pay $11 per share in cash for the 33.7 percent of the unit it doesn’t now control, a 53.4 percent premium to yesterday’s closing share price, Gerdau said today in a filing with Brazilian regulators. The price for the shares represents “full and fair value,” Gerdau Chairman Jorge Gerdau Johannpeter said today in a separate PR Newswire statement. Ameristeel would benefit from cheaper funding after the transaction because of Gerdau’s stronger credit ratings, according to the company. Gerdau said May 6 first quarter profit rose to 504.3 million reais ($274 million) or 35 centavos a share, from 88.4 million reais, or 6 centavos a year earlier as global steel demand rebounded. Link to Company News:{GGBR4 BZ CN } Link to Company News:{GNA CN CN }

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Healthscope Gets Two $1.5 Billion Bids, Topping Offer From Blackstone, TPG

May 30, 2010

By Simeon Bennett May 31 (Bloomberg) — Healthscope Ltd. received two additional takeover offers that value Australia’s second-biggest hospital owner at A$1.84 billion ($1.6 billion) and top a bid by Blackstone Group LP and its partners. The new proposals, both of A$5.80 a share, are 11 percent above Healthscope’s May 28 closing price. The board considers the offers to be at least equal to an earlier A$5.75-a-share bid, the Melbourne-based company said in a statement today. Last week, Blackstone joined TPG Capital and Carlyle Group in bidding for Healthscope, according to a person familiar with the matter. Healthscope, whose profit has grown an average of 36 percent over the past nine years, said it’s allowing the new bidders to review its financial accounts. Selling the pathology business and putting its hospitals in a real estate fund could value the shares at as much as A$7 each, UBS AG said. “A breakup makes most sense,” said Andrew Goodsall , a health-care analyst at UBS in Sydney, in a telephone interview. Healthscope’s managers “are solid operators,” he said. “If there’s earnings upside to be had, they would have had it.” Healthscope shares advanced 5 percent to A$5.49 as of 12:34 p.m. local time, headed for a two-year high. The S&P/ASX 200 Index slipped 0.3 percent. KKR Bid The stock has climbed 22 percent on the Australian stock exchange since first announcing a takeover approach on May 14. Concern among investors that the deal may not proceed is preventing the shares rising further, said John Hester , a health-care analyst at Linwar Securities Ltd. in Sydney. “These are non-binding offers,” Hester said in a telephone interview. “There’s potential for these bids to all fall over. If I was a significant holder, I’d certainly be looking to reduce my position.” Hester rates the stock “market perform.” Kohlberg Kravis Roberts & Co. may make a bid for Healthscope tomorrow, the Australian Financial Review reported today, without saying where it got the information. KKR may bid with another firm and offer about A$6 a share, the report said. Healthscope, which is being advised by Goldman Sachs JBWere Pty and Lazard Ltd., hasn’t given the names of any of its bidders. One may be a U.S.-based private hospital operator being advised by Citigroup Inc., the Australian Financial Review said in a separate report today, without identifying the company or saying where it got the information. Private hospital groups in Australia, including Healthscope’s larger rival Ramsay Health Care Ltd. , are benefiting from increasing demand from an aging population and government measures aimed at boosting private coverage. Uptake of health insurance reached a 27-year high in March and one in two Australians have hospital policies, Health Minister Nicola Roxon said this month. Healthscope owns or operates 43 hospitals in Australia, including the Prince of Wales Private Hospital in Sydney’s eastern suburbs and Melbourne Private Hospital on the fringe of the city’s central business district. It also runs the Gribbles pathology chain in Australia, New Zealand, Malaysia, Singapore and Mauritius. To contact the reporter on this story: Simeon Bennett in Singapore at sbennett9@bloomberg.net

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Man Group Agrees to Acquire GLG Partners in Deal Valued at $1.6 Billion

May 17, 2010

By David Altaner May 17 (Bloomberg) — Man Group Plc said it agreed to acquire GLG Partners in a deal that values the shares of GLG at about $1.6 billion.

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Shorting Profits Fade as Bets Against Banks Backfire

May 3, 2010

By Lynn Thomasson May 3 (Bloomberg) — The biggest U.S. equity rally in seven decades is wiping out profits for stock-market bears who have yet to capitulate on bets against banks, retailers and casinos. Hedge funds that profit from falling shares have seen 34 percent of their value evaporate since February 2009, according to Chicago-based Hedge Fund Research Inc. Zions Bancorp. , Sears Holdings Corp. and Wynn Resorts Ltd., among the favorites of so- called short-sellers , caused the biggest losses as their shares more than tripled. “Certainly there are things that we look at and, in retrospect, wish we had not been short,” said Doug Burtnick , who runs a long-short fund for Aberdeen, Scotland-based Aberdeen Asset Management Plc, which oversees about $240 billion. “There were a handful of companies that looked in early 2009 like they could very well be out of business, and those were also the ones where the stock prices rebounded very dramatically.” The combination of record-low interest rates, first-quarter economic growth of 3.2 percent and analyst estimates for the fastest profit gains in 14 years erased 94 percent of the HFRI EH Short Bias Index’s advance from June 2007 to February 2009. The better news for bulls is that the percentage of New York Stock Exchange shares that remain shorted is higher than any time before 2008, providing more grist for gains should speculators be forced to retreat. ‘Face Ripped Off’ The 10 stocks with the most bearish wagers in April 2009 rallied an average 22 percent this year, data compiled by Bloomberg show. “If you were short this market, you’ve had your face ripped off,” said Dan Veru , who helps oversee $3.1 billion as co-chief investment officer at Palisade Capital Management in Fort Lee, New Jersey. “Some investors clearly held onto their shorts too long.” HFR data show funds focusing on both bullish and bearish equity speculation have gained 29 percent on average since March 2009, trailing the Standard & Poor’s 500 Index’s 47 percent surge. Long-short strategies made up 32 percent of hedge fund assets in the fourth quarter, an April 8 report from the research firm showed. Those funds hold up better during retreats, helping them beat the market over time, said Charles Gradante , co-founder of advisory firm Hennessee Group LLC in New York. The HFR measure of long-short funds lost 29 percent in the last bear market, compared with the S&P 500’s 49 percent slump, monthly data show. Downside Protection “The market is due for a correction, and when the correction takes place, hedge funds will end up outperforming,” Gradante said. “The worst market for a hedge fund is a market that’s going straight up, and that’s what’s happening now.” The S&P 500 remains more than 20 percent below its record 1,565.15 from October 2007. The gauge fell 2.5 percent to 1,186.69 last week, the most since January, as credit downgrades fueled concern Greece and Portugal will default. It climbed 0.7 percent to 1,194.96 as of 9:56 a.m. in New York today. Greece outlawed short selling on the Athens Stock Exchange until June 28 after the benchmark stock index fell as much as 18 percent this month. When the U.S. Securities and Exchange Commission banned those sales in almost 1,000 financial stocks from Sept. 19 to Oct. 8, 2008, banks, brokers and insurers in the S&P 500 fell 31 percent. About 3.7 percent of NYSE shares have been borrowed and sold by traders hoping to profit by buying the stock back at a lower price, data from the exchange shows. Short interest fell 24 percent from the July 2008 peak as equities gained and investors repurchased shares. “I haven’t really seen anyone looking to put on new short positions,” said William Byrne , director of trading for Conifer Securities LLC, which executes orders for more than 100 hedge funds in San Francisco. “You’d think there’d have to be some air to come out, but there’s still an underlying bid to the market.” Bailing Out Customers withdrew $177.5 million from funds that specialize in short strategies since March 2009, according to Morningstar Inc. They added $582.5 million during the bear market, data from the Chicago-based research firm show. Investors speculated most against financial firms, retailers and restaurant operators, betting the highest unemployment rate in 26 years would hold down profits. More than 6 percent of shares in those S&P 500 industries were sold short, according to data compiled by Bloomberg. That backfired as the economy recovered and the shares more than tripled. Gross domestic product may expand 3 percent this year and 3 percent in 2011, the median estimate of 64 economists surveyed by Bloomberg show. ‘Upside Down’ “It’s been tough because things are shorted upside down — the worse the company is, the more it’s gone up,” said Harry Rady , who oversees $270 million and runs a long-short fund as chief executive officer of Rady Asset Management LLC in La Jolla, California. “I wouldn’t want to be a pure short seller.” Zions was the S&P 500’s 11th most shorted stock in April 2009 after losses in construction and commercial loans drove the shares down 93 percent in two years. The Salt Lake City-based lender reduced credit losses, spurring a 124 percent rally this year, the biggest in the index. Bearish bets account for 19 percent of the bank’s shares available for trading, making it the seventh-most-shorted stock in the S&P 500, according to exchange data from April 15. Zions, which operates in 10 western U.S. states, posted its sixth straight quarterly loss on April 19. Analysts estimate it won’t be profitable until 2011. Loaded for Bear “The administration, the Congress and the Fed did everything they could to rescue the economy and helped the most the worst companies,” said John Burbank III , the chief investment officer of Passport Capital, a $2.8 billion hedge- fund firm in San Francisco. “It doesn’t make for a positive market” for short sellers, he said. Investors are sticking to bearish bets on Sears , the largest U.S. department store operator, after the stock more than quadrupled since its November 2008 low. About 20 percent of shares in the Hoffman Estates, Illinois-based company were sold short on April 15, the fifth-most in the S&P 500. That compares with 27 percent a year ago, data compiled by Bloomberg show. U.S. retail sales increased 1.6 percent in March, the most in four months, the Commerce Department in Washington said on April 14. A group of retailers , auto companies and hotel operators in the S&P 500 has beaten first-quarter profit estimates by an average 20 percent, the second-biggest margin among the 10 main industries. Blackjack Wynn was the eighth-most-shorted stock in the S&P 500 in April 2009 after plunging 91 percent during the credit crisis, according to data compiled by Bloomberg. The Las Vegas-based casino company founded by Steve Wynn has risen 473 percent since then, reducing the proportion of bearish bets to 9.9 percent of those available to trading. That cut its ranking to 50th. “Big short interest is always a bullish indicator,” said Barton Biggs , who helps oversee $1.4 billion at New York-based hedge fund Traxis Partners LP and said he was buying stocks when the market bottomed. “There’s been bursts of short covering in the junk. By definition, in a big rally, short sellers are going to lose money. It’s really not much more complicated than that.” To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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Short Selling Profits Disappear as Bets Against Automakers, Banks Backfire

May 3, 2010

By Lynn Thomasson May 3 (Bloomberg) — The biggest U.S. equity rally in seven decades is wiping out profits for stock-market bears who have yet to capitulate on bets against banks, retailers and casinos. Hedge funds that profit from falling shares have seen 34 percent of their value evaporate since February 2009, according to Chicago-based Hedge Fund Research Inc. Zions Bancorp. , Sears Holdings Corp. and Wynn Resorts Ltd., among the favorites of so- called short-sellers , caused the biggest losses as their shares more than tripled. “Certainly there are things that we look at and, in retrospect, wish we had not been short,” said Doug Burtnick , who runs a long-short fund for Aberdeen, Scotland-based Aberdeen Asset Management Plc, which oversees about $240 billion. “There were a handful of companies that looked in early 2009 like they could very well be out of business, and those were also the ones where the stock prices rebounded very dramatically.” The combination of record-low interest rates, first-quarter economic growth of 3.2 percent and analyst estimates for the fastest profit gains in 14 years erased 94 percent of the HFRI EH Short Bias Index’s advance from June 2007 to February 2009. The better news for bulls is that the percentage of New York Stock Exchange shares that remain shorted is higher than any time before 2008, providing more grist for gains should speculators be forced to retreat. ‘Face Ripped Off’ The 10 stocks with the most bearish wagers in April 2009 rallied an average 22 percent this year, data compiled by Bloomberg show. “If you were short this market, you’ve had your face ripped off,” said Dan Veru , who helps oversee $3.1 billion as co-chief investment officer at Palisade Capital Management in Fort Lee, New Jersey. “Some investors clearly held onto their shorts too long.” HFR data show funds focusing on both bullish and bearish equity speculation have gained 29 percent on average since March 2009, trailing the Standard & Poor’s 500 Index’s 47 percent surge. Long-short strategies made up 32 percent of hedge fund assets in the fourth quarter, an April 8 report from the research firm showed. Those funds hold up better during retreats, helping them beat the market over time, said Charles Gradante , co-founder of advisory firm Hennessee Group LLC in New York. The HFR measure of long-short funds lost 29 percent in the last bear market, compared with the S&P 500’s 49 percent slump, monthly data show. Downside Protection “The market is due for a correction, and when the correction takes place, hedge funds will end up outperforming,” Gradante said. “The worst market for a hedge fund is a market that’s going straight up, and that’s what’s happening now.” The S&P 500 remains 24 percent below its record 1,565.15 from October 2007. It fell 2.5 percent to 1,186.69 last week, the most since January, as credit downgrades fueled concern Greece and Portugal will default. Greece outlawed short selling on the Athens Stock Exchange until June 28 after the benchmark stock index fell as much as 18 percent this month. When the U.S. Securities and Exchange Commission banned those sales in almost 1,000 financial stocks from Sept. 19 to Oct. 8, 2008, banks, brokers and insurers in the S&P 500 fell 31 percent. About 3.7 percent of NYSE shares have been borrowed and sold by traders hoping to profit by buying the stock back at a lower price, data from the exchange shows. Short interest fell 24 percent from the July 2008 peak as equities gained and investors repurchased shares. “I haven’t really seen anyone looking to put on new short positions,” said William Byrne , director of trading for Conifer Securities LLC, which executes orders for more than 100 hedge funds in San Francisco. “You’d think there’d have to be some air to come out, but there’s still an underlying bid to the market.” Bailing Out Customers withdrew $177.5 million from funds that specialize in short strategies since March 2009, according to Morningstar Inc. They added $582.5 million during the bear market, data from the Chicago-based research firm show. Investors speculated most against financial firms, retailers and restaurant operators, betting the highest unemployment rate in 26 years would hold down profits. More than 6 percent of shares in those S&P 500 industries were sold short, according to data compiled by Bloomberg. That backfired as the economy recovered and the shares more than tripled. Gross domestic product may expand 3 percent this year and 3 percent in 2011, the median estimate of 64 economists surveyed by Bloomberg show. ‘Upside Down’ “It’s been tough because things are shorted upside down — the worse the company is, the more it’s gone up,” said Harry Rady , who oversees $270 million and runs a long-short fund as chief executive officer of Rady Asset Management LLC in La Jolla, California. “I wouldn’t want to be a pure short seller.” Zions was the S&P 500’s 11th most shorted stock in April 2009 after losses in construction and commercial loans drove the shares down 93 percent in two years. The Salt Lake City-based lender reduced credit losses, spurring a 124 percent rally this year, the biggest in the index. Bearish bets account for 19 percent of the bank’s shares available for trading, making it the seventh-most-shorted stock in the S&P 500, according to exchange data from April 15. Zions, which operates in 10 western U.S. states, posted its sixth straight quarterly loss on April 19. Analysts estimate it won’t be profitable until 2011. Loaded for Bear “The administration, the Congress and the Fed did everything they could to rescue the economy and helped the most the worst companies,” said John Burbank III , the chief investment officer of Passport Capital, a $2.8 billion hedge- fund firm in San Francisco. “It doesn’t make for a positive market” for short sellers, he said. Investors are sticking to bearish bets on Sears , the largest U.S. department store operator, after the stock more than quadrupled since its November 2008 low. About 20 percent of shares in the Hoffman Estates, Illinois-based company were sold short on April 15, the fifth-most in the S&P 500. That compares with 27 percent a year ago, data compiled by Bloomberg show. U.S. retail sales increased 1.6 percent in March, the most in four months, the Commerce Department in Washington said on April 14. A group of retailers , auto companies and hotel operators in the S&P 500 has beaten first-quarter profit estimates by an average 20 percent, the second-biggest margin among the 10 main industries. Blackjack Wynn was the eighth-most-shorted stock in the S&P 500 in April 2009 after plunging 91 percent during the credit crisis, according to data compiled by Bloomberg. The Las Vegas-based casino company founded by Steve Wynn has risen 473 percent since then, reducing the proportion of bearish bets to 9.9 percent of those available to trading. That cut its ranking to 50th. “Big short interest is always a bullish indicator,” said Barton Biggs , who helps oversee $1.4 billion at New York-based hedge fund Traxis Partners LP and said he was buying stocks when the market bottomed. “There’s been bursts of short covering in the junk. By definition, in a big rally, short sellers are going to lose money. It’s really not much more complicated than that.” To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net .

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Treasury May Begin Selling Citigroup Shares Today

April 26, 2010

By Rebecca Christie and Bradley Keoun April 26 (Bloomberg) — The U.S. Treasury Department may start selling its 7.7 billion Citigroup Inc. shares as soon as today, in the biggest step since December to wean the bailed-out bank off government support. The Treasury has initially granted underwriter Morgan Stanley authorization to sell 1.5 billion of the shares, New York-based Citigroup said today in a registration statement filed with securities regulators. The filing allows Treasury to begin selling immediately, said two people with knowledge of the matter, who declined to be identified because they weren’t authorized to comment beyond the public statements. Citigroup had to get a $45 billion bailout in late 2008 when it almost collapsed. Chief Executive Vikram Pandit has taken steps to end the bank’s use of government support, while President Barack Obama says he wants to recoup “every single dime” of taxpayer money from the $700 billion Troubled Asset Relief Program used to provide bailout funds. “We’re putting TARP out of its misery,” Treasury Secretary Timothy F. Geithner said in an interview with CNN television aired yesterday. “This is going to cost us much less in fiscal terms than even the S&L crisis,” he said, referring to the collapse of savings and loan banks in the 1980s and 1990s. The bank’s shares fell 25 cents, or 5.1 percent, to $4.61 as of 4 p.m. in New York Stock Exchange composite trading . Based on that price, the Treasury’s overall stake has a value of about $36 billion, for a paper profit of $11 billion. The government got the shares by converting $25 billion of bailout money into common stock at $3.25 each. Pre-Arranged Plan The Treasury will sell its common shares in the market “in an orderly fashion under a pre-arranged written trading plan,” the department said in a statement . The government devised the plan earlier this year to help insulate officials from politically driven claims they mistimed the market and got too little profit from the sales, people familiar with the matter said at the time. Citigroup spokesman Stephen Cohen declined to comment. The Treasury stake is the government’s biggest remaining investment in Citigroup, after the bank repaid $20 billion of the bailout funds in December. The government still owns about $5 billion of Citigroup’s trust preferred securities, a class of junior debt. The Treasury didn’t release further details about the timing of the sale of common shares. Morgan Stanley According to the filing, Citigroup must pay Morgan Stanley’s fees for underwriting the Treasury’s offering. Morgan Stanley was chosen in March after the government interviewed several investment banks, including Citigroup. Morgan Stanley, the sixth-largest U.S. bank by assets, will get 0.3 cents for each share sold on electronic trading systems and 1.75 cents for shares sold through other means, according to the filing. That works out to total fees of $23 million to $135 million. The New York-based firm will also get a one-time administration fee of $500,000. The Citigroup shares will be sold gradually over the course of 2010, the agency said March 29 in a statement. Citigroup will provide quarterly updates on the number of shares sold by the Treasury through Morgan Stanley, and the amount of fees paid by the bank to Morgan Stanley, according to the filing. Because of the “doctrine of sovereign immunity,” the Treasury is immune from claims under securities-law violations that apply to most other traders and investors, according to the filing. Pandit’s View Pandit said on April 20 at the bank’s annual shareholder meeting that he felt “a whole lot better” than he did a year ago and maintained that the bank is “positioned for growth.” The Treasury’s trust preferred securities in Citigroup, and warrants to buy additional common shares, will be sold separately, the department said. Citigroup’s associate general counsel, Michael Tarpley, is the bank’s main legal adviser on the Treasury sale, according to the filing. The law firm Simpson Thacher & Bartlett LLP is advising Treasury, while Cleary Gottlieb Steen & Hamilton LLP and Davis Polk & Wardwell LLP are advising Morgan Stanley. To contact the reporter on this story: Rebecca Christie in Washington at rchristie4@bloomberg.net ; Bradley Keoun in New York at bkeoun@bloomberg.net .

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Microsoft Sales Miss Some Estimates in Sign Companies Delaying PC Spending

April 22, 2010

By Dina Bass April 22 (Bloomberg) — Microsoft Corp., the world’s largest software maker, reported third-quarter revenue that missed analysts’ most optimistic predictions, a sign that corporate customers may be putting off computer buying. Sales rose 6.3 percent to $14.5 billion, compared with analysts’ estimates that were as high as $14.8 billion for the quarter that ended March 31. Shares fell in late trading. While Microsoft’s Windows business has benefited from increased consumer demand for personal computers, corporations have hung back, avoiding purchases of new machines and long-term contracts. Investors held out for added evidence of a spending resurgence after chipmaker Intel Corp. last week forecast rising sales this quarter and record profit margins for 2010. “Expectations were for more, given the strength we’ve seen in PC sales,” Brendan Barnicle , an analyst at Pacific Crest Securities, said in an interview from Portland, Oregon. He rates the shares “outperform” and said he doesn’t own them. Microsoft fell $1.02, or 3.3 percent, to $30.37 in extended trading after the report. The shares had risen 6 cents to $31.39 at 4 p.m. New York time on the Nasdaq Stock Market . The stock fell 3.9 percent last quarter, while the Standard and Poor’s 500 Index rose 4.9 percent. Third-quarter net income rose 35 percent to $4.01 billion, or 45 cents a share, beating the average forecast of 42 cents in a Bloomberg survey of analysts. Sales exceeded the $14.4 billion average in the survey, reflecting rising demand for Windows 7, the latest version of Microsoft’s flagship operating system. Putting Off Orders Still, some companies are reluctant to place orders that stretch over years. Unearned revenue, a measure of multiyear contracts, was $12.3 billion. Analysts’ average estimate was $12.8 billion, according to Katherine Egbert , an analyst at Jefferies & Co. In January, Microsoft reported second-quarter profit that beat analysts’ estimates by 15 cents. “The deferred revenue was lower than expected, suggesting that enterprise spending is still just beginning to recover,” said Sarah Friar , a San Francisco-based analyst for Goldman Sachs Group who has a “buy” rating on Microsoft. “Enterprise spending is still making its way out of the downturn.” Microsoft said operating expenses for the year ending June 30 will be $26.1 billion to $26.3 billion, compared with a January prediction of $26.2 billion to $26.5 billion. Microsoft no longer provides forecasts for sales and profit. Mixed Bag “Consumer demand is still strong, but we also saw for the first time growth in business hardware spending,” said Peter Klein , Microsoft’s chief financial officer, in an interview. Yet, it’s still taking longer to close multiyear deals. The company did have growth in billings for multiyear agreements, he said. “We are starting to fill that pipeline,” he said. “I think it will resolve itself over time.” In the third quarter a year ago, net income was $2.98 billion, or 33 cents a share, on sales of $13.6 billion. Technology bellwethers reporting earnings in recent weeks have given a mixed picture of the rebound in technology spending. Oracle Corp., the second-biggest software maker behind Microsoft, last month forecast the fastest sales growth for new software licenses since mid-2008. Intel , the world’s biggest chipmaker, last week indicated that recovery may be gathering steam with a forecast for rising sales this quarter. “People had thought there would be closer correlation between what Intel said about PC demand and PC outlook” and Microsoft’s results, said Sasa Zorovic , a Boston-based analyst with Janney Montgomery Scott LLC. “That doesn’t seem to be the case.” He rates the shares “neutral.” Office Still, International Business Machines Corp. reported a drop in services signings, showing corporate spending on larger technology projects hasn’t picked up yet. Microsoft Business Division revenue, mostly from Office productivity software, fell 5.9 percent to $4.24 billion as some customers held off purchases before Microsoft begins rolling out a new version next month. Server software sales were $3.58 billion, missing estimates from Goldman Sachs and UBS AG. While sales of server computers have started to recover, it will take longer for sales of Microsoft’s related software to come back, Microsoft’s Klein said. Information-technology spending will climb 1.7 percent in 2010, after dropping 3.1 percent last year, according to an estimate from Morgan Stanley. Personal-computer shipments rose 27 percent last quarter, according to Gartner Inc. The PC market bounced back from the year-earlier period, when the recession dragged down shipments almost 7 percent — the worst performance since 2001, according to market research firm IDC. Business, Bing Revenue in Microsoft’s Business Division was reduced as the company deferred some sales to a future quarter. The company gave customers who have purchased older versions of Office the right to upgrade to the new version, Office 2010, which is available to businesses next month. It hits stores in June. Online advertising revenue rose 19 percent as search and graphical display ad markets recovered, Klein said. Sales in the company’s online business rose 11.6 percent to $566 million. Microsoft’s Bing search engine has increased the company’s share of searches by 3.7 percentage points since Microsoft overhauled the product in June, according to research firm ComScore Inc. Microsoft had 11.7 percent of the U.S. search market in March, compared with 65.1 percent for Google Inc. and 16.9 percent for Yahoo! Inc., according to ComScore. To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

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GE Options Traders Boost Bullish Bets Before Release of Quarterly Results

April 15, 2010

By Jeff Kearns April 15 (Bloomberg) — Trading of bullish General Electric Co. options rose to double the four-week average as investors boosted bets that the shares will advance to a 17-month high tomorrow after the company reports earnings. Almost 185,000 calls giving the right to buy the stock changed hands at 1:40 p.m. New York time as the shares climbed a fourth day, adding 1.4 percent to $19.62. The most-active contracts were April $20 calls, which more than doubled to 21 cents for the fourth-biggest gain among GE options. This month’s options expire at tomorrow’s close. “The bullish earnings flow comes with the options implying about a 4 percent move from earnings compared to a 3 percent average and 2.6 percent median move from earnings,” options strategists at Susquehanna International Group LLP in Bala Cynwyd, Pennsylvania, wrote in a report. About 50,000 of the 66,000 April $20 calls traded were initiated by investors creating new positions, they wrote. GE, the world’s biggest maker of jet engines, power-plant turbines and medical-imaging equipment, may say tomorrow that profit from continuing operations fell to 16 cents a share from 26 cents a year earlier, analysts estimate. To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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Most U.S. Stocks Advance as Fed Signals Plans to Leave Interest Rates Low

April 6, 2010

By Whitney Kisling April 6 (Bloomberg) — Most U.S. stocks rose as the Federal Reserve suggested it plans to leave its benchmark interest rate at a record low to safeguard the economic recovery and banks rallied on analyst upgrades. SunTrust Banks Inc. rose 3.5 percent as Credit Suisse Group AG said the lender may be a takeover target, while Regions Financial Corp. jumped 4.4 percent as its share-price estimate was lifted. Travelers Cos. led the Dow Jones Industrial Average lower after Sandler O’Neill & Partners LP downgraded the shares. Benchmark indexes climbed to their highs of the day after minutes from the last Fed policy meeting showed some central- bank officials warned of raising rates too soon. About four stocks advanced for every three that fell on U.S. exchanges. The Standard & Poor’s 500 Index increased 0.2 percent to 1,189.44 at 4 p.m. in New York. The Dow slipped 3.56 points, or less than 0.1 percent, to 10,969.99. “The Federal Reserve is going to continue to allow money to slosh into the markets for a much longer period than they normally would because this was a much deeper recession than usual,” said William Smead , chief executive officer of Smead Capital Management, which oversees $175 million in Seattle, and portfolio manager of the Smead Value Fund. “Any signs that indicate that that elongated period is going to go on is bullish for stocks.” U.S. equities opened lower on concern a yearlong rally left the S&P 500 too expensive after the benchmark gauge closed at an 18-month high yesterday. The index is trading at 19 times the reported operating profits of its companies, the highest price- earnings ratio this year, according to Bloomberg data. Fed Lifts Stocks Stocks turned higher as the minutes from the Fed’s March meeting showed officials saw signs of a strengthening recovery while saying it could be hobbled by high unemployment and tight credit. “While recent data pointed to a noticeable pickup in the pace of consumer spending during the first quarter, participants agreed that household spending going forward was likely to remain constrained by weak labor market conditions, lower housing wealth, tight credit, and modest income growth,” minutes of the March 16 Federal Open Market Committee released today in Washington showed. Stocks rose yesterday after a report April 2 showed the biggest increase in jobs in three years. Releases on April 5 showing growth in service industries and home sales boosted optimism an economic recovery may be gathering steam. ‘Positive’ Momentum “Overall, the momentum remains positive,” said Alan Gayle , a money manager at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “The economic data of late is surprising to the upside and April tends to be a fairly good month from a seasonal perspective.” Regional banks climbed after Credit Suisse said SunTrust may be a target for overseas financial companies. The firm also increased its price estimate for Regions Financial Corp. to $8 from $7. SunTrust climbed 3.5 percent to $28.71. Regions rallied 4.4 percent to $8.55. Financial companies gained the most in the S&P 500 among 10 groups, led by bank stocks. U.S. large-cap bank shares were raised to “market weight” from “underweight” at Wells Fargo & Co., which said “fundamentals and economy support a more positive outlook.” El Paso Corp. rose after winning regulatory approval for its biggest expansion project, the $3 billion conduit that will carry gas from a trading hub in Opal, Wyoming, to interconnections near Malin, Oregon. Shares of the owner of the longest U.S. natural-gas pipeline network climbed 1.6 percent to $11.66, the highest price since October 2008. AutoNation, Alcoa AutoNation Inc. rose 3.4 percent to $18.65 after saying first-quarter profit from continuing operations was higher than its previous projection. Alcoa Inc. will kick off earnings season April 12 when it reports first-quarter results. S&P 500 companies will post 30 percent profit growth from 2009’s first quarter, according to the average of analyst estimates compiled by Bloomberg. Massey Energy Co. slumped 11 percent to $48.45, its biggest decline since June, after an explosion at one of the company’s mines in West Virginia killed 25 workers and left four miners missing, the worst accident of its kind in the U.S. since 1984. CA Inc. , the second-largest maker of software for mainframe computers, fell 1.9 percent to $23.40 after saying 2010 profit will be at the low end of its forecast range and it will cut about 1,000 jobs. Homebuilders slid. KB Home, the Los Angeles-based homebuilder that sells to first-time buyers, was cut to “neutral” from “outperform” at Credit Suisse, which said sales may be slower once the homebuyer tax credit expires. The shares fell 2.8 percent to $16.51. Credit Suisse also cut Pulte Group Inc., rating the shares “underperform” from “neutral.” The stock dropped 2.5 percent to $11.16. Intel Corp. , the world’s largest semiconductor maker, curbed gains among a group of S&P 500 technology companies, losing 0.8 percent to $22.40. Intel’s first-quarter revenue probably won’t be a “blowout” and will be followed by “flat to slightly down, consistent with seasonality” revenue the next quarter, FBR Capital Markets wrote in a note today. FBR maintained its “market perform” rating and $27 price target on the stock. Travelers Cos. fell the most in the Dow , dropping 1.4 percent to $52.59 after it was cut to “hold” from “buy” at Sandler O’Neill & Partners LP. The S&P 500 has rallied 76 percent from its March 2009 depths as the Federal Reserve maintained record low interest rates and the economy began to recover from the worst recession since World War II. During the first quarter the gauge rallied 4.9 percent, the biggest advance to start a year since 1998. To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net .

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Campbell’s Soup Loses Out to Nestle’s Pizza, Kraft’s Macaroni and Cheese

April 5, 2010

By Matthew Boyle April 5 (Bloomberg) — Frozen pizza, microwave dinners and macaroni and cheese are eating into Campbell Soup Co. ’s U.S. sales. Discounting by Campbell, the biggest U.S. soup maker, failed to lift sales in the past month, said Alexia Howard , an analyst at Sanford C. Bernstein & Co. in New York. Campbell lost market share in the four weeks ended March 20 as its soup sales dropped 4.2 percent, according to data that market researcher Nielsen Co. released to clients last week. “The historical trend of canned soup doing well in difficult times did not play out in this recession,” Howard said in a telephone interview. “It’s a little bit unfathomable. Price-based competition from other ‘simple meals’ categories may have had an impact.” More consumers are buying competing products from Nestle SA , ConAgra Foods Inc. and Kraft Foods Inc. as sales in the $5 billion U.S. soup industry fall, according to data from the companies and research firms. The most recent decline exacerbates market-share losses over more than two decades. The share of at-home lunch meals with soup fell to 12 percent from 14.4 percent from 1985 to 2009, and dinners with soup shrank to 5.6 percent from 6.5 percent, according to market researcher NPD Group. In the same period, the percentage of meals with pizza, macaroni and cheese or a frozen entrée rose, NPD said. “Soup seems to be losing share as a category to any number of meal alternatives including frozen meals, mac and cheese, even something as simple as a sandwich that the consumer makes at home,” Cynthia Axelrod , an analyst at Glenmede Trust Co. in Philadelphia. Glenmede Trust manages $18 billion and owned 122,361 Campbell shares as of Dec. 31, according to data compiled by Bloomberg. ‘Hiccup’ Drop Campbell Chief Executive Officer Doug Conant , 58, called last quarter’s 18 percent drop in ready-to-serve soup sales a “hiccup,” blaming a lack of promotion at retailers and Campbell’s failure to fully take into account the competition from other simple meals. Conant said on a Feb. 22 conference call that soup sales would rebound this quarter, helped by marketing plans. Those actions have led to a “strongly improved trend” in the ready-to-serve business, Anthony Sanzio , a Campbell spokesman, said last week. Soup sales by volume increased in the four weeks ended March 20, he said. “We remain optimistic about our entire soup business,” Sanzio said. Soup Discounts Last month, food retailers including Albertsons, a unit of Supervalu Inc. , offered two cans of Campbell’s Chunky soup for $3, which is 50 cents more than a typical price for one can. Price Chopper Supermarkets, a chain of stores in the Northeast, was selling Chunky cans for $1, according to its Web site. Those discounts may offset the benefits Campbell gains from productivity improvements and lower ingredient costs, according to Eric Serotta , an analyst at Consumer Edge Research in Stamford, Connecticut. “Clearly, that’s going to have an impact on their margins,” he said. He recommends selling the shares. Campbell’s gross margin, the fraction of sales left after subtracting the cost of goods sold, widened to 40.5 percent in the second quarter ended Jan. 31 from 39.4 percent a year earlier. On Feb. 22, Campbell reiterated that full-year earnings would rise as much as 11 percent from $2.21 a share. Share Prices Campbell, based in Camden, New Jersey, gained 4 cents to $35.60 at 10:56 a.m. in New York Stock Exchange composite trading . Omaha, Nebraska-based ConAgra declined 1 cent to $25.22, and Kraft Foods, based in Northfield, Illinois, fell 4 cents to $30.30. Nestle, based in Vevey, Switzerland, dropped 20 centimes to 53.80 Swiss francs in Zurich trading on April 1, the last day the shares traded. Soup represents about 80 percent of Campbell’s $3.8 billion U.S. soup, sauces, and beverages unit, according to Andrew Lazar , an analyst at Barclays Capital. That division, which makes Chunky and Select Harvest ready-to-serve soups and condensed soups such as tomato and cream of mushroom, accounts for half of total sales. Eating into Campbell’s sales are frozen-pizza brands such as DiGiorno, according to Bernstein’s Howard . She rates the shares “outperform,” based on productivity improvements and lower ingredient costs that have widened gross margin. DiGiorno Pizza DiGiorno frozen pizza, which Kraft sold to Nestle this year, posted a 25 percent gain in sales in the 52 weeks ending Feb. 21, according to market researcher SymphonyIRI of Chicago. Kraft’s Macaroni and Cheese dry mixes rose 8.5 percent, according to SymphonyIRI. The data excludes Wal-Mart Stores Inc. sales. Sales of Marie Callender’s frozen meals, made by ConAgra, advanced 12 percent during that period, Teresa Paulsen , a company spokeswoman, said in an e-mail. Consumers don’t consider soup a replacement for the restaurant meals they are forgoing to save money, according to consumer-trend analyst Candace Corlett , president of consulting firm WSL Strategic Retail in New York, which surveys Americans on their shopping patterns and habits. When they go out, they eat dishes such as pasta, hamburgers, and french fries, she said in a telephone interview. “When soup sales slip in this kind of a winter, it isn’t a hiccup, it’s more like a seizure,” said Ryan Mathews, a consumer-trend analyst at Black Monk Consulting in Eastpointe, Michigan. To contact the reporter on this story: Matthew Boyle at Mboyle20@bloomberg.net .

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The Zacks Mutual Fund Rank reveals its top 5 Real Estate funds: DWS RREEF Real Estate Securities A, JPMorgan US Real Estate A, Forward Select Income A, Cohen & Steers Realty Shares and Natixis AEW Real Estate A

March 30, 2010

CHICAGO – (Business Wire) Today Zacks.com features the Top 5 Real Estate Funds; DWS RREEF Real Estate Securities A (RRRAX), JPMorgan US Real Estate A (SUSIX), Forward Select Income A (KIFAX), Cohen & Steers Realty Shares (CSRSX) and Natixis AEW Real

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Pandit Says He `Wouldn’t Be `Surprised’ If Treasury Weighing Sale of Stake

March 11, 2010

By Bradley Keoun March 12 (Bloomberg) — Citigroup Inc. Chief Executive Officer Vikram Pandit said the U.S. Treasury Department will be free to sell its 27 percent stake in the bank starting next week and that he “wouldn’t be surprised” if the government were considering a sale. “They’re free to do what they want to do,” Pandit said yesterday at an investor conference in New York. “I wouldn’t be surprised if they would actively think about something,” given where the stock is trading, he said. The Treasury got its 7.7 billion shares in the New York- based bank last September, when the department converted $25 billion of bailout money into common shares at a cost of $3.25 each. The stock rose to $4.18 in New York Stock Exchange composite trading yesterday, giving the government a 29 percent paper gain on the stake, or about $7.2 billion. A 90-day moratorium on a sale of the Treasury’s shares expires March 16, Pandit said. The Treasury, which has said it plans to sell the shares this year, is conducting a round of interviews with securities firms, including Citigroup, to decide which should manage the sale, a person with direct knowledge of the discussions said. A range of strategies are under consideration, including a managed offering of the shares or selling them over time into the market, the person said, speaking anonymously because the talks are private. An average of 1.2 billion shares have changed hands each day over the past three days, compared with a daily average so far this year of 465 million shares, data compiled by Bloomberg show. The Treasury would have to publicly register its shares before beginning to sell them on the open market, Citigroup Chief Financial Officer John Gerspach said at the conference. In December, when Citigroup sold new shares to help repay $20 billion of bailout money, the Treasury said it would hold off selling any shares for at least 90 days. The Treasury missed a chance to unload the shares for a $13 billion profit last October, when the stock price climbed as high as $5 and valued the stake at $38 billion. To contact the reporter on this story: Bradley Keoun in New York at bkeoun@bloomberg.net .

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U.S. Stocks Advance on Anniversary of S&P 500 Index’s 2009 Bear-Market Low

March 9, 2010

By Rita Nazareth and Elizabeth Stanton March 9 (Bloomberg) — U.S. stocks rose on the anniversary of the 2009 bear-market low for the Standard & Poor’s 500 Index amid speculation the economy will continue to recover from the worst contraction since the Great Depression. American International Group Inc. surged 13 percent on speculation the insurer will sell more assets. United Technologies Corp., General Electric Co. and AT&T Inc. led gains in the Dow Jones Industrial Average . Boeing Co. advanced after Northrop Grumman Co. withdrew as a bidder for a U.S. Air Force contract. Benchmark indexes briefly erased gains in the final hour as the S&P 500 climbed within 0.5 percent of its 2010 high. The S&P 500 rose 0.2 percent to 1,140.45 at 4:10 p.m. in New York. The Dow Jones Industrial Average advanced 11.86 points, or 0.1 percent, to 10,564.38. Six stocks advanced for every five that fell on the New York Stock Exchange and Nasdaq Stock Market. “It’s happy anniversary day,” said Philip Orlando , New York-based chief equity market strategist at Federated Investors Inc., which oversees $400 billion. “The economy is out of recession, the improvement is sustainable and stocks will continue grinding higher. Investors are waiting for the next catalyst.” The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today, the biggest rally for the index since the 1930s. The main benchmark for U.S. stocks has recovered losses after sliding as much as 8.1 percent from this year’s high amid concern that some European countries’ will fail to pay back debt and speculation the Federal Reserve will need to rein in emergency stimulus measures as the economy improves. ‘Still Cheap’ Improving profits have reduced the S&P 500’s valuation to 18.3 times its companies reported operating earnings, compared with a multiple of 22.9 in December. “Stocks are still cheap,” said billionaire Kenneth Fisher , who oversees $37 billion as chairman of Fisher Investments Inc. in Woodside, California. “The nature of the beginning of the second year of a bull market is one where people are still climbing the wall of worry and they have ‘acrophobia,’” he said, referring to the fear of heights. The S&P 500 climbed as high as 1,145.37 today, near the 15- month closing high of 1,150.23 reached on Jan. 19. The rally that day extended the index’s advance from March 9, 2009, to 70 percent. “I believe we’ll play around that 1,150 level until we decide to go one way or the other,” said James Paulsen , who helps oversee about $375 billion as chief investment strategist at Wells Capital Management in Minneapolis. “We might break through this, but we need catalysts.” AIG Rallies AIG led gains by financial companies bailed out by the U.S. government on speculation the insurer will sell more assets after raising $51 billion through deals. “We’re hearing some rumors AIG might sell more assets,” said Michael Nasto , the senior trader at U.S. Global Investors Inc., which manages about $2.5 billion in San Antonio. “Their ability to raise capital is a positive thing. Back on the days when they were having all those problems, there was talk of whether or not the company could even be salvaged. Not only they are still around, the companies under their umbrella have value.” AIG jumped 13 percent to $32.77 for the biggest gain in the S&P 500. Citigroup Inc. advanced 7.3 percent to $3.82 for the second-biggest gain in the index as Fox Business Network said the U.S. may sell its stake in the bank within three months, without saying where it got the information. Fannie Mae climbed 5.9 percent to $1.07, and Freddie Mac increased 7.6 percent to $1.28. Risk Assets “We’re poised for risk assets to do well for a few quarters,” said David Darst , the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.6 trillion in client assets. “The interest rate is low, inflation is low and liquidity is enormous. The final positive is global growth.” United Technologies had the biggest gain in the Dow average, rising 1.4 percent to $71.78. The maker of Pratt & Whitney jet engines and Otis elevators was raised to “outperform” from “neutral” at Cowen & Co. UAL Corp. rose 3.7 percent to $18.16. The parent of United Airlines said February revenue for each passenger flown a mile increased by between 17 percent and 19 percent. Boeing, Sprint Boeing gained 0.8 percent to $67.79. The world’s second- largest commercial-plane maker is the only bidder for the U.S. Air Force’s $35 billion tanker program after Northrop Grumman withdrew because the government refused to alter some of its requirements. Sprint Nextel Corp. had the third-biggest gain in the S&P 500, jumping 6.5 percent to $3.62. The third-largest U.S. wireless company advanced for a second day after saying it expects revenue growth in the next several quarters and saying it will pay down debt and control expenses. Sprint, the third-largest U.S. wireless carriers, led a 1.2 percent rally in telephone companies, the biggest advance among 10 groups. Industrial shares climbed 0.8 percent as a group, the second biggest gain of the 10. Yum! Brands Inc. climbed 3.4 percent to $36.60. UBS AG upgraded the shares to “buy” from “neutral” and raised its price estimate on the shares by 16 percent to $44, saying the stock has underperformed its global consumer peers. Comerica Inc. retreated 1.6 percent to $35.70. The bank, with a market value of about $5.5 billion, is raising about $800 million by selling shares. BMO Capital Markets cut its rating on the shares to “market perform” from “outperform.” First Solar Inc. fell 2.2 percent to $106.22. The world’s largest maker of thin-film solar modules was downgraded to “underweight” from “neutral” at JPMorgan. Energy Conversion Devices Inc. , also lowered to “underweight” from “neutral” at JPMorgan, fell 8.1 percent to $7.87. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Stocks in U.S. Advance on Anniversary of 2009 Bear-Market Low for S&P 500

March 9, 2010

By Rita Nazareth and Elizabeth Stanton March 9 (Bloomberg) — U.S. stocks rose on the anniversary of the 2009 bear-market low for the Standard & Poor’s 500 Index amid speculation the economy will continue to recover from the worst contraction since the Great Depression. United Technologies Corp., Microsoft Corp. and General Electric Co. led gains in the Dow Jones Industrial Average . Boeing Co. advanced after Northrop Grumman Co. withdrew as a bidder for a U.S. Air Force contract. UAL Corp. rallied 8.5 percent after reporting an increase in a measure of revenue. The S&P 500 rose 0.6 percent to 1,144.82 at 1:20 p.m. in New York. The benchmark gauge for U.S. equities ended a six-day rally and closed little changed yesterday. The Dow Jones Industrial Average advanced 53.81 points, or 0.5 percent, to 10,606.33. “It’s happy anniversary day,” said Philip Orlando , New York-based chief equity market strategist at Federated Investors Inc., which oversees $400 billion. “The economy is out of recession, the improvement is sustainable and stocks will continue grinding higher. Investors are waiting for the next catalyst.” The S&P 500 is up 69 percent since hitting a 12-year low of 676.53 one year ago today, the biggest rally for the index since the Great Depression. The main benchmark for American equities is still down more than 1 percent from this year’s high amid concern about some European countries’ ability to pay back debt and as investors speculated the Federal Reserve will need to rein in emergency stimulus measures as the economy improves. ‘Acrophobia’ “Stocks are still cheap,” said billionaire Kenneth Fisher , who oversees $37 billion as chairman of Fisher Investments Inc. in Woodside, California. “The nature of the beginning of the second year of a bull market is one where people are still climbing the wall of worry and they have ‘acrophobia’ because they didn’t expect we’d go up so much and that gives them fear of heights. We’ll see the year nicely higher.” “We’re poised for risk assets to do well for a few quarters,” said David Darst , the New-York based chief investment strategist at Morgan Stanley Smith Barney, which has $1.6 trillion in client assets. “The interest rate is low, inflation is low and liquidity is enormous. The final positive is global growth. At the end of this year, we’ll be looking at 2011 earnings, when the market can earn $85. If you put a 14 times multiple on that, it gives you a 1,233 price for the S&P 500.” United Technologies United Technologies increased 1.9 percent to $72.09. The maker of Pratt & Whitney jet engines and Otis elevators was raised to “outperform” from “neutral” at Cowen & Co. UAL rose 8.5 percent to $19. The parent of United Airlines said February revenue for each passenger flown a mile increased by between 17 percent and 19 percent. Boeing gained 1.1 percent to $68. The world’s second- largest commercial-plane maker is the only bidder for the U.S. Air Force’s $35 billion tanker program after Northrop Grumman withdrew because the government refused to alter some of its requirements. Sprint Nextel Corp. rose the most in the S&P 500, jumping 7.4 percent to $3.65. The third-largest U.S. wireless company advanced for a second day after saying it expects revenue growth in the next several quarters and saying it will pay down debt and control expenses. Sprint Rallies Sprint, the third-largest U.S. wireless carriers, led a 1.6 percent rally in telephone companies, the biggest advance among 10 groups. Industrial shares climbed 1 percent as a group, the second biggest gain of the 10. Yum! Brands Inc. climbed 3.7 percent to $36.72. UBS AG upgraded the shares to “buy” from “neutral” and raised its price estimate on the shares 16 percent to $44, saying the stock has underperformed its global consumer peers. Comerica Inc. retreated 1.6 percent to $35.72. The bank, with a market value of about $5.5 billion, is raising about $800 million by selling shares. BMO Capital Markets cut its rating on the shares to “market perform” from “outperform.” First Solar Inc. fell 1.7 percent to $106.75. The world’s largest maker of thin-film solar modules was downgraded to “underweight” from “neutral” at JPMorgan. Energy Conversion Devices Inc. , also lowered to “underweight” from “neutral” at JPMorgan, fell 2.9 percent to $8.31. To contact the reporters on this story: Elizabeth Stanton in New York at estanton@bloomberg.net ; Rita Nazareth in New York at rnazareth@bloomberg.net .

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Video: Apollo Shares Fall as Company Trims Forecast on Bad Debt: Video

February 19, 2010

Feb. 19 (Bloomberg) — Shares of Apollo Group Inc., owner of the second largest university in the U.S., plunged today after the company said second-quarter profits would be lower than expected because of an increase in bad debt. Bloomberg’s Zahra Burton reports. (Source: Bloomberg)

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Apple’s Mac, IPhone Shipments Are Investor `Bogeys’ Following Share Run-Up

January 25, 2010

By Connie Guglielmo Jan. 25 (Bloomberg) — Apple Inc. may need to deliver first-quarter sales of almost 9 million iPhones and more than 3 million Macs to appease investors, who have already driven the shares to a record in anticipation of a new tablet device. “Investors are thinking: 3.1 million to 3.2 million Macs and phones of 8.8 million,” said Gene Munster , an analyst with Piper Jaffray & Co. “Those are the two bogeys.” The holiday shopping season has been Apple’s biggest sales quarter for the past four years, and analysts surveyed by Bloomberg are predicting record revenue and profit when the company reports first quarter earnings today. The iPhone and Mac together accounted for more than 60 percent of its $9.87 billion in sales in the fourth quarter. Apple will follow today’s earnings report with a product event on Jan. 27. The company plans to unveil its long-awaited tablet computer, a person familiar with the matter said earlier this month. Analysts have speculated for at least a year that Apple is building a larger-screen version of its iPod Touch, which would let users watch movies, read books and surf the Internet. Apple , based in Cupertino, California, climbed to a record closing price of $215.04 on Jan. 19, the day after the company sent out invitations to the product event. The shares, which more than doubled last year, rose $3.26 to $201.01 at 11:55 a.m. in Nasdaq Stock Market trading. First-Quarter Earnings “We think the December quarter will be enough to keep the stock going higher into the event,” said Munster, a Minneapolis-based analyst who recommends buying the shares. He doesn’t own the stock personally. “But after the event, history will likely repeat itself with the typical sell on the news.” For the first quarter, analysts are estimating a 19 percent jump in sales to $12.1 billion and profit of $2.08 a share, according to Bloomberg survey . In October, Apple forecast sales of $11.3 billion to $11.6 billion and profit of as much as $1.78 a share. The company typically tops its forecast and analysts’ estimates, Bloomberg data show. Munster predicts Apple will report sales of 9.3 million iPhones and 3.1 million Macs, up from 4.36 million phones and 2.52 million computers a year ago. Toni Sacconaghi , an analyst at Sanford C. Bernstein & Co. in New York, is counting on sales of 8.5 million iPhones and 3.1 million Macs. Andy Hargreaves of Pacific Crest Securities Inc. in Portland, Oregon, says investors are expecting 9.1 million to 9.2 million iPhones. ‘The Key Issue’ “IPhone shipments will be the key issue this quarter,” Sacconaghi, the top-ranked computer analyst by Institutional Investor magazine, said in a note last week. Some investors may have set their expectations too high, at 10 million or more, he said. That enthusiasm may be driven in part by Apple’s entry last quarter into China, the world’s biggest mobile-phone market. China Unicom (Hong Kong) Ltd. said last month that it has sold more than 100,000 iPhones since the product debuted in the country in October. IPhone shipments broke a record in the September quarter, with 7.4 million units sold. Apple ’s release of the faster, thinner 3GS model fueled those orders. The iPhone, which first debuted in June 2007, is now sold in more than 80 markets. Shaw Wu , an analyst with Kaufman Bros. in San Francisco, said he’s looking for shipments of 9.5 million iPhones — with total sales at $12.4 billion and earnings of $2.15 a share. Whether Apple tops his estimates or not, Wu doesn’t expect investors to abandon what he describes as a “cult stock.” “Apple is almost a hero to investors — it’s one of the few companies which is doing extremely well,” said Wu, who recommends buying the shares. “There are high expectations, but there’s also a positive bias toward Apple, which is why we don’t expect it to sell off that much. It’s a must-own stock.” To contact the reporter on this story: Connie Guglielmo in San Francisco at cguglielmo1@bloomberg.net

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European Stocks Decline as Alstom, HSBC, Casino Retreat; Cadbury Advances

January 19, 2010

By Adam Haigh Jan. 19 (Bloomberg) — European stocks declined before a report that may show investor confidence in the region’s biggest economy dropped for a fourth month in January amid signs the recovery is slowing. Asian shares also fell, while U.S. index futures were little changed. Alstom SA, the world’s second-largest train maker, and Casino Guichard-Perrachon SA slid at least 1.5 percent after reporting fourth-quarter sales that missed analysts’ estimates. HSBC Holdings Plc paced a retreat among banks after Exane BNP Paribas recommended selling the shares. Cadbury Plc jumped 3.3 percent as Kraft Foods Inc. announced its recommended final offer for the U.K. chocolate maker. Europe’s Dow Jones Stoxx 600 Index slipped 0.5 percent to 256.97 as of 9:10 a.m. in London. The regional benchmark gauge has climbed 63 percent since March 9, boosted by record-low interest rates in the U.S. and Europe and about $12 trillion committed by governments worldwide to revive the economy. The rally has slowed in 2010 as the measure posted its first weekly decline in a month. “There’s been a nervousness this year in terms of investors trying to understand when and how central banks will exit the stimulus process,” said Gregor Smith , a fund manager at Daiwa Asset Management in London who helps oversee about $1 billion. “A few people have just decided this is as good as it gets for the rally and are taking some profits.” German Confidence Germany’s ZEW Center for European Economic Research may say its index of investor and analyst expectations fell to 50 from 50.4 in December, according to the median of 37 forecasts in a Bloomberg News survey. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim. Standard & Poor’s 500 Index futures expiring in March added 0.1 percent ahead of trading in the U.S., where markets were closed yesterday. Citigroup Inc. and International Business Machines Corp. are among companies scheduled to report results today. Analysts estimate fourth-quarter profits in the S&P 500 grew 67 percent on average, data compiled by Bloomberg show. The MSCI Asia Pacific Index lost 0.4 percent today. Japan Airlines Corp., Asia’s biggest carrier, said it’s filing for bankruptcy, according to the government’s chief spokesman. Alstom sank 3.4 percent to 52.25 euros. Sales in the fourth quarter rose to 4.69 billion euros ($6.75 billion) from 4.56 billion euros a year earlier. That trailed the average estimate of 4.81 billion euros in a Bloomberg survey of seven analysts . Casino, HSBC Casino slid 1.5 percent to 61.09 euros after saying revenue from continued operations in the three months ended Dec. 31 rose to 7.32 billion euros from 7.17 billion euros a year earlier. That missed the 7.36 billion-euro estimate from eight analysts surveyed by Bloomberg. Banks were the worst performers among 19 industry groups in the Stoxx 600 today, followed by industrial-goods companies. HSBC, Europe’s largest bank, slid 1.2 percent to 690.5 pence after Exane downgraded the shares to “underperform” from “ neutral .” Barclays Plc, the U.K.’s second-biggest bank, lost 2.2 percent to 310.9 pence as Credit Suisse Group AG cut its price estimate on the shares by 13 percent, saying its forecasts imply a “sizeable capital deficit,” according to a report to clients today. The bank has an “outperform” recommendation on the stock and said “this is a relative call rather than a particularly upbeat view on Barclays’ shares.” Cadbury climbed 3.3 percent to 834 pence. Kraft offered 840 pence a share for the U.K. company in a revised bid. Shareholders of Cadbury will also be entitled to a special dividend of 10 pence. Daimler AG lost 1.2 percent to 36.68 euros after Nomura Holdings Inc. cut its recommendation on the German maker of luxury cars and trucks to “neutral” from “buy.” To contact the reporter on this story: Adam Haigh in London at ahaigh1@bloomberg.net

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Warren Buffett Wants to Buy More Posco Stock, Steelmaker Says; Shares Rise

January 19, 2010

By Sungwoo Park Jan. 19 (Bloomberg) — Warren Buffett wants to increase his stake in Posco , Asia’s most profitable steelmaker said after its Chief Executive Officer Chung Joon Yang met the billionaire chairman of Berkshire Hathaway Inc. Berkshire “holds about 3.9 million shares to 4 million shares of Posco and will increase the holding,” South Korea’s largest steelmaker said today in an e-mailed statement. Omaha, Nebraska-based Berkshire didn’t immediately respond to a message left with Buffett’s assistant Debbie Bosanek after 9:30 p.m. local time. “I should have bought more Posco shares when the stock price declined in the economic crisis last year,” the statement cited Buffett, 79, as saying. Berkshire owns 3.95 million shares in Posco, bought for $768 million, according to its Feb. 28, 2009 annual statement . Buffett is showing a profit of more than $1.3 billion on his Posco holding as the world economy rebounds from the worst recession since World War II. The Pohang-based steelmaker plans to raise output by 17 percent this year, and will almost double capital spending to a record to invest in plants and a mine. Posco shares rose 1 percent to 604,000 won at 2:24 p.m. in Seoul, outperforming a 0.2 percent loss in the benchmark Kospi index. “The interest of an investment guru such as Buffett is of course positive to the shares,” said Kim Young Chan , a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages the equivalent of $28 billion in assets. “If we actually get data that Buffett increased Posco holdings, that should provide a short-term boost to the shares.” World Steel World steel demand will surge 10 percent, Posco said last week when it announced a 77 percent jump in fourth-quarter profit. The company is planning $30 billion of overseas expansions in India, Vietnam and Indonesia, and last week said it will buy a stake in an Australian iron ore mine to secure supplies of the steelmaking ingredient. Buffett “positively welcomes and agrees” to Posco’s investment plans to increase raw material supplies and acquire companies to beef up its global marketing efforts, today’s statement said. Berkshire first disclosed a 4 percent stake in Posco in February 2007. The company had bought 3.49 million shares for $572 million, according to the annual letter to shareholders Buffett wrote then. Berkshire’s 3.95 million Posco shares are worth 2.36 trillion won ($2.1 billion) at yesterday’s close. “I’m pretty sure that the current management is doing a good job,” the statement cited Buffett as saying. Visit Korea Buffett “hopes” to visit South Korea again in autumn this year if there’s an opportunity, Posco said. Buffett made a trip to the country in 2007. Buffett said last May that some South Korean companies were undervalued, telling reporters at the time he had a book about South Korea’s publicly-traded companies that he studied for possible investments. The Oracle of Omaha, as he is known, built Berkshire over four decades from a failing maker of men’s suit linings into a $150 billion company through successful stock picks and dozens of takeovers. To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net .

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MGM Mirage Option Traders Betting Casino Operator Stock Doubles in a Year

December 28, 2009

By Jeff Kearns Dec. 28 (Bloomberg) — Options traders are doubling down on MGM Mirage , betting a new 67-acre (27 hectares) complex of gaming tables, hotels, condominiums and stores will restore the casino operator’s profits. Investors buying contracts to purchase MGM for twice its current stock price through January 2011 helped drive the number of bullish options on the shares to 1.5 times the level of bearish ones, the highest ratio since June 2008, according to data compiled by Bloomberg. Existing January 2011 $20 calls increased 12-fold last week as the shares fell to $9.50. “It’s an aggressive play,” said Frederic Ruffy , the senior options strategist at WhatsTrading.com, the New York- based provider of options-market analysis. “They’re looking for a substantial move higher.” MGM, the Las Vegas Strip’s largest casino owner, is counting on the $8.5 billion CityCenter resort, which opened to the public on Dec. 1, to reduce its $13 billion long-term debt load. MGM shares have dropped 31 percent this year, following an 84 percent drop in 2008 that ended a nine-year rally . The stock has lost 11 percent since Nov. 24, the day before Dubai World, the state-owned company that is MGM’s partner in CityCenter, roiled global markets by seeking to delay payments on its own debt. CityCenter is protected against default by its owners, MGM Chief Executive Officer Jim Murren said in a Nov. 27 interview. More Visitors Travel to Las Vegas will rise 7 percent to at least 38 million visitors in 2010, Murren said Nov. 18. CityCenter’s almost 6,000 rooms may steal guests from Last Vegas-based MGM’s other resorts in the city and hold down room rates at Las Vegas Sands Corp. , Wynn Resorts Ltd. and Harrah’s Entertainment Inc. as well as MGM, analysts say. MGM will trim its annual loss to 52 cents a share in 2010 from 72 cents this year, according to the average estimate of 23 analysts in a Bloomberg survey. While the company earned $1.04 a share in 2008, MGM said in March that it may not stay in compliance with financial covenants under its senior credit facility this year. Trading of bullish MGM options jumped to a seven-week high on Dec. 23. Investors created new contracts , lifting the number of existing calls at the end of last week to 324,566, compared with 211,881 puts giving the right to sell. Open interest for January 2011 $20 calls jumped 12-fold to 21,652 on Dec. 23 for last week’s biggest increase among the company’s options, according to data compiled by Bloomberg and Trade Alert LLC, a New York-based provider of market analytics. Open interest for January 2011 $15 calls jumped more than fivefold the previous day to 23,084 for last week’s second- biggest increase, the data show. “It’s a long shot,” Joshua Belanger , founder of OptionSizzle.com, a Stamford, Connecticut-based provider of options market data. “But given how much these casino names can move, it could really give them some bang for their buck.” To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net .

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Video: Merriman’s Fetyko Says AOL Subscriptions `Going to Zero’: Video

December 21, 2009

Dec. 21 (Bloomberg) — Richard Fetyko, an analyst at Merriman Curhan Ford & Co., talks with Bloomberg’s Pimm Fox about the outlook for AOL Inc.’s subscriptions. Fetyko also discusses management’s strategy to turn AOL around, the company’s advertising-network business and his “sell” rating on the shares. (Source: Bloomberg)

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Citigroup Shares Decline After U.S. Treasury Decides to Delay Stake Sale

December 17, 2009

By Michael J. Moore and Michael Tsang Dec. 17 (Bloomberg) — Citigroup Inc. fell as much as 9.3 percent in New York trading after the U.S. Treasury Department delayed selling its stake in the bank following a $17 billion new-stock deal. Citigroup fell 23 cents, or 6.7 percent, to $3.22 at 10:56 a.m. on the New York Stock Exchange, the biggest decline since Sept. 15. The bank sold 5.4 billion shares at $3.15 apiece yesterday, less than the $3.25 the government paid when it acquired a one-third stake in the New York-based bank in September. Citigroup said Treasury won’t sell any of its shares for at least 90 days. Investors demanded a bigger discount from Citigroup than Bank of America Corp. or Wells Fargo & Co. , which together raised more than $31 billion this month to exit the Troubled Asset Relief Program. Wells Fargo, which trumped Citigroup Chief Executive Officer Vikram Pandit ’s bid to buy Wachovia Corp. last year, leapfrogged its rival by completing a $12.25 billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in June. “The market cast its vote and they’re low down on the ballot,” said Douglas Ciocca , a managing director at Renaissance Financial Corp. in Leawood, Kansas. “Citigroup needs to show steps to reinstall the quality of the brand.” With the sale, Citigroup’s common shares outstanding increased to 28.3 billion. That’s up from 22.9 billion as of Sept. 30 and 5 billion at the end of 2007. “More shares outstanding means less value per share,” said Edward Najarian , an analyst at International Strategy and Investment Group in New York, who has a “hold” rating on the shares. “The whole structure of their deal to pay back TARP wasn’t very good for common shareholders and that is being reflected in the pricing.” Price Discount The $3.15 price on the new shares was a 20 percent discount from the closing price on Dec. 11, before Citigroup announced the plan to repay TARP. “Wells Fargo proved they can execute better,” said Michael Johnson , chief market strategist at M.S. Howells & Co., a Scottsdale, Arizona-based broker-dealer. Pandit, 52, is “sitting on one of the best investment banks in the world and Wells, which really doesn’t have an investment bank, still outperforms him,” Johnson said. The government decided not to participate in the equity offering based on the pricing of the shares, according to a Treasury official. The U.S. expects to divest its ownership stake in Citigroup shares during the next 12 months, the official said. Equity Units The bank said it also raised $3.5 billion by selling “tangible equity units,” securities that make quarterly payments of 7.5 percent a year and include a requirement to buy Citigroup shares in 2012. The total of $20.5 billion was the largest public equity offering in the history of U.S. capital markets, according to Citigroup. Citigroup’s Dec. 15 announcement that Abu Dhabi Investment Authority was trying to abort an accord to buy $7.5 billion of Citigroup stock may also have hurt confidence in the bank’s secondary stock offering, said Blake Howells , an analyst at Becker Capital Management in Portland, Oregon. Abu Dhabi “certainly couldn’t help,” Howells said. Citigroup said earlier this week that it would sell at least $20.5 billion of equity and debt to exit TARP. After that announcement, the Treasury said it would sell as much as $5 billion of its stake, in conjunction with the bank’s secondary offering, with the rest to be sold over the next year. Treasury’s Stake The Treasury holds $25 billion in common stock in Citigroup, along with a $20 billion preferred equity stake and further preferred shares granted in connection with an asset- guarantee agreement. At the offering price of $3.15, the 7.7 billion shares are valued about $770 million less than the Treasury’s cost. Bank of America, the largest U.S. lender, raised its funds on Dec. 3. The Charlotte, North Carolina-based bank, which yesterday named Brian Moynihan as its new chief executive officer, sold 1.286 billion so-called common equivalent securities at $15 each, a 4.8 percent discount to its closing price that day. Wells Fargo, whose largest shareholder is billionaire investor Warren Buffett’s Berkshire Hathaway Inc., completed its sale at a 1.9 percent discount. To contact the reporters on this story: Michael Moore in New York at mmoore55@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Citigroup Stock Sale Discount Prompts Treasury to Delay Disposal of Stake

December 17, 2009

By Michael J. Moore and Michael Tsang Dec. 17 (Bloomberg) — Citigroup Inc. , the last of the four largest U.S. banks to seek funds to exit a taxpayer bailout, raised $17 billion by selling stock for a price so low that the U.S. delayed plans to shrink its one-third stake in the lender. Citigroup sold 5.4 billion shares at $3.15 apiece, less than the $3.25 the government paid when it acquired its stake in September. The New York-based bank said the Treasury won’t sell any of its shares for at least 90 days. Investors demanded a bigger discount from Citigroup than Bank of America Corp. or Wells Fargo & Co. , which together raised more than $31 billion this month to exit the Troubled Asset Relief Program. Wells Fargo, which trumped Citigroup Chief Executive Officer Vikram Pandit ’s bid to buy Wachovia Corp. last year, leapfrogged its rival by completing a $12.25 billion share sale Dec. 15. JPMorgan Chase & Co. repaid $25 billion in June. “The market cast its vote and they’re low down on the ballot,” said Douglas Ciocca , a managing director at Renaissance Financial Corp. in Leawood, Kansas. “Citigroup needs to show steps to reinstall the quality of the brand.” With the sale, Citigroup’s common shares outstanding increased to 28.3 billion. That’s up from 22.9 billion as of Sept. 30 and 5 billion at the end of 2007. “More shares outstanding means less value per share,” said Edward Najarian , an analyst at International Strategy and Investment Group in New York, who has a “hold” rating on the shares. “The whole structure of their deal to pay back TARP wasn’t very good for common shareholders and that is being reflected in the pricing.” Price Discount The lender’s shares fell 30 cents, or 8.7 percent, to $3.15 in New York trading at 6:52 a.m. The $3.15 price on the new shares is a 20 percent discount from the closing price on Dec. 11, before Citigroup announced the plan to repay TARP. “Wells Fargo proved they can execute better,” said Michael Johnson , chief market strategist at M.S. Howells & Co., a Scottsdale, Arizona-based broker-dealer. Pandit, 52, is “sitting on one of the best investment banks in the world and Wells, which really doesn’t have an investment bank, still outperforms him,” Johnson said. The government decided not to participate in the equity offering based on the pricing of the shares, according to a Treasury official. The U.S. expects to divest its ownership stake in Citigroup shares during the next 12 months, the official said. Equity Units The bank said it also raised $3.5 billion by selling “tangible equity units,” securities that make quarterly payments of 7.5 percent a year and include a requirement to buy Citigroup shares in 2012. The total of $20.5 billion was the largest public equity offering in the history of U.S. capital markets, according to Citigroup. Citigroup’s Dec. 15 announcement that Abu Dhabi Investment Authority was trying to abort an accord to buy $7.5 billion of Citigroup stock may also have hurt confidence in the bank’s secondary stock offering, said Blake Howells , an analyst at Becker Capital Management in Portland, Oregon. Abu Dhabi “certainly couldn’t help,” Howells said. Citigroup said earlier this week that it would sell at least $20.5 billion of equity and debt to exit TARP. After that announcement, the Treasury said it would sell as much as $5 billion of its stake, in conjunction with the bank’s secondary offering, with the rest to be sold over the next year. Treasury’s Stake The Treasury holds $25 billion in common stock in Citigroup, along with a $20 billion preferred equity stake and further preferred shares granted in connection with an asset- guarantee agreement. At the offering price of $3.15, the 7.7 billion shares are valued about $770 million less than the Treasury’s cost. Bank of America, the largest U.S. lender, raised its funds on Dec. 3. The Charlotte, North Carolina-based bank, which yesterday named Brian Moynihan as its new chief executive officer, sold 1.286 billion so-called common equivalent securities at $15 each, a 4.8 percent discount to its closing price that day. Wells Fargo, whose largest shareholder is billionaire investor Warren Buffett’s Berkshire Hathaway Inc., completed its sale at a 1.9 percent discount. To contact the reporters on this story: Michael Moore in New York at mmoore55@bloomberg.net ; Michael Tsang in New York at mtsang1@bloomberg.net .

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Opportunity Investment Fund I, LLC Announces Amendment to Terms of Tender Offer for 100,000 Shares of Common Stock of Piedmont Office Realty Trust, Inc.

December 16, 2009

NEWPORT BEACH, Calif., Dec. 16, 2009 (GLOBE NEWSWIRE) — Opportunity Investment Fund I, LLC, a Delaware limited liability company, today announced that it is amending certain terms of its previously announced tender offer to acquire 100,000 shares of common stock (“Shares”) of Piedmont Office Realty Trust, Inc., a Maryland corporation, at a purchase price equal to $4.60 per Share, less the amount of any dividends declared or made with respect to the Shares between November 16, 2009 and December 18, 2009 or such other date to which this offer may be extended (the “Expiration Date”), in cash, without interest, upon the terms and subject to the conditions set forth in a Offer to Purchase and a related Letter of Transmittal, as each may be supplemented or amended from time to time (which together constitute the “Offer” and the “Tender Offer Documents”).

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RIM Bulls Bet on 31% Rally With Options as BlackBerry Maker Targets China

December 9, 2009

By Jeff Kearns and Hugo Miller Dec. 9 (Bloomberg) — Traders are snapping up options on Research In Motion Ltd. , betting the shares will climb 31 percent in five weeks as sales in China accelerate. Investors buying contracts to purchase RIM for $80 through Jan. 15 helped drive bullish contracts on the stock to twice the level of bearish ones, the highest ratio since March 2006, according to data compiled by Bloomberg. The last time so-called calls outnumbered puts by as much, shares of the Waterloo, Ontario-based BlackBerry maker quadrupled in 19 months. Traders are speculating RIM will rebound from a 26 percent decline since the company forecast sales in September that were below analysts’ estimates, said Nick Agostino , an analyst at Research Capital Corp. in Toronto who has recommended the shares for more than three years. RIM is expanding distribution in China and its BlackBerry Curve surpassed Cupertino, California- based Apple Inc.’s iPhone as the top-selling consumer smart phone last quarter, helped by price cuts. “People are realizing the haircut the stock has taken since the last quarter was overdone,“ Agostino said. “People were looking for further deterioration in the business model, and what they’re seeing recently from sales channels is signs of what could be a stable quarter.” The stock must rise 31 percent from yesterday’s close of $61.16 in U.S. trading to reach the so-called strike price on the January $80 contracts. Calls give the right to buy shares for a given price through a certain date, while puts convey the right to sell. RIM hasn’t closed above $80 since September. Lower Than Estimated Shares of RIM have fallen since the company said Sept. 24 that revenue for the three-month period that ended Nov. 28 would be as low as $3.6 billion, less than the average analyst projection of $3.91 billion, according to data compiled by Bloomberg. January $80 calls have more than doubled since Dec. 4 to 96,650 contracts, the highest so-called open interest for RIM options. That’s the steepest rise among the company’s options during the past two weeks, according to data compiled by Bloomberg and Trade Alert LLC, a New York-based provider of market analytics. The company said yesterday that it will sell a BlackBerry customized for China and partner with an affiliate of Lenovo Group Ltd. to increase business in the world’s biggest mobile- phone market. On Dec. 7, RIM reached an agreement to expand distribution through Digital China Holdings Ltd. Both Lenovo and Digital China are based in Hong Kong. ‘Growth Potential’ “That has shown people there is international growth potential in the stock,” Agostino said. RIM gets more than 70 percent of its revenue from North America, according to data compiled by Bloomberg. The RIM options rose 14 percent to 50 cents yesterday. Trading volume exceeded 25,000 contracts on Dec. 4 and Dec. 7. “Upside call buying remains the theme,” options strategists at Susquehanna International Group LLP in Bala Cynwyd, Pennsylvania, wrote in a Dec. 7 report. “This trading suggests investors are using these relatively inexpensive calls in order to position for significant move to the upside in shares over the coming months.” To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net ; Hugo Miller in Toronto at hugomiller@bloomberg.net .

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