If Goldman’s business starts suffering from the stain of the SEC’s lawsuit after a stellar quarter of earnings, the investment bank’s role in the rehabilitation of the financial sector could look more like a quadruple bypass at the heart of the matter.
Goldman’s stunningly hot earnings are nothing new. The company routinely throttles forecasts. So it almost didn’t matter how much money they earned. Think about that for a second. The nation’s most celebrated money maker getting no love from investors for making more money than it was expecting. What else is it supposed to do? Or, more importantly, are investors finally beginning to begrudge Goldman Sachs its success? If clients start to become fearful about doing business with the bank because of the lawsuit, its earnings-generating power will take a hit.
Most free marketers are happy to overlook a certain amount of outsmartiness from investment banks. After all, these are the rocket scientists who made mountains of cash by piling multiple levels of risk on dodgy investments and calling them hedges. Sure, such alchemy blew up in many a face, but the logic behind the free market does have a role to play here. Shorting synthetic CDOs would have ultimately helped force the market to recognize how much hot air was behind the subprime-fueled boom. But by not disclosing a mechanism built to fail — the Abacus CDO in question — Goldman Sachs may have taken too deep a bite out of the hand that feeds it.
When companies are being investigated by the SEC, they get a Wells Notice. They usually tell the markets when they get one. It’s a disclosure thing — you need to be upfront with the market about information that could be material to your results. There is no crime in not telling markets that you’ve received a Wells Notice, so long as the information is not material. But Goldman’s share price is tumbling, and even if it wins its battle with the SEC, Goldman could face angry shareholder charges for not revealing much sooner that it faced potential civil liability.
Simon Property says it is teaming up with hedge fund Paulson to try to unseat Brookfield Asset Management as the key investor in General Growth Properties as the mall operator angles toward an exit from its bankruptcy.
Simon said it and Paulson would invest $2.5 billion to help General Growth exit bankruptcy, and more importantly, make the investment without taking any warrants to buy shares like Brookfield and other investors have under its current plan, Paritosh Bansal reports.
Our report that the money-losing smartphone maker went to China in February in an attempt to sell itself to telecom/tech titan Huawei Technologies makes perfect sense. The mystery is that the talks appeared to go nowhere. Huawei and ZTE, the two big Chinese telecom equipment makers, both have money and ambition and would only be helped by a well-known brand like Palm, right?
Unfortunately, Palm is currently well known for being the laggard behind Apple and RIM, so any buyer will have to have a sensible plan for revitalizing the brand against two of the best in the business. But if Huawei and ZTE are holding out for a better brand, they could be in for a long wait. Palm may not be number one, but it is still a premium brand in a shark-infested marketplace.
The owner of Hardee’s and Carl’s Jr. hamburger chains said it has received a new takeover offer that has no evidence of committed financing and is subject to several conditions. Still, fast-food investors scarfed down CKE shares on the news.
In February, CKE agreed to be bought by private equity firm Thomas H. Lee Partners for $619 million cash. It had until Tuesday to shop for other offers. That’s when Porter Orlin, a New York-based investment manager holding a chunk of CKE shares, piped up with a letter saying he was opposed to the deal because it undervalued the business.
Blockbuster‘s biggest shareholder, and one of the market’s most prominent activist investors, is heading for the door, heaping another note of gloom to the video chain’s hopes to avoid bankruptcy.
Filings show Billionaire investor Carl Icahn cut his stake in Blockbuster by selling more than 13 million shares. Over the past week he trimmed his ownership of the Class A shares to 5.1 percent as of March 29, according to a federal filing. In January he reported a 16.9 percent stake. He also reduced his stake in the company’s Class B shares.
Interest is a murky business in Muslim finance, in which religious doctrine prohibits earning money from money loaned. And while bankers are largely upbeat about the deal being offered by Dubai to bail out Dubai World and its property unit Nakheel, relieved that they are getting anything at all, perhaps they will take some solace from the interest prohibition when they say a final goodbye to any interest they were due.
Dubai World is being recapitalized and Nakheel’s bonds are to be paid off — sans interest — with $9.5 billion of aid. The funds include about $4 billion from the government of Dubai and a previous loan of $5.7 billion from oil-rich neighbor Abu Dhabi. The plan is Dubai’s attempt to restructure some $26 billion in debt held by Dubai World, owner of the QE2 liner and Cirque du Soleil assets. Nakheel is the developer that conjured the emirate’s iconic global map made of islands.
Hot on the heels of Consol Energy’s agreement to buy Dominion Resources’ Appalachian natural gas properties for $3.48 billion in cash, a source tells us Indian energy major Reliance Industries wants to team up with Atlas Energy to develop gas operations in the same hot area of the U.S.: Marcellus Shale.
Independent oil and gas company Atlas has been seeking a partner for its operations in the energy-rich region, and Reliance has been hungry for a deal for months, having been rebuffed twice in efforts to take over foreign firms.
Apparel company Phillips-Van Heusen agreed to buy fashion brand Tommy Hilfiger from London-based Apax Partners in a cash and stock deal for about $3 billion to boost its presence in Europe and Asia. It expects to use $3.05 billion debt, $385 million cash at hand, $200 million perpetual convertible preferred stock and $200 million from a common stock offering to finance the deal and refinance certain other debt.
Consol Energy agreed to buy Dominion Resources Inc’s Appalachian natural gas properties for $3.48 billion in cash, giving Consol a leading position in the growing Marcellus Shale field. It too is going to the debt markets to finance the deal, though for how much exactly is not yet known, Consol’s shares fell more than 9 percent after it said it would issue $4 billion in debt and equity to fund the purchase and development of the property.
British interdealer broker Tullett Prebon confirmed it was in preliminary talks that might lead to an offer. The stock is up over 24 percent, valuing the company at nearly 830 million pounds ($1.2 billion), so investors see some merit in the idea, but an analyst we spoke to questioned whether the potential buyers talked about in a Daily Mail newspaper report are logical buyers.
One of them is Macquarie Group, Australia’s top investment bank. Oriel Securities analyst Keith Baird said Macquarie’s expansion of global investment banking business show it is more interested in arranging deals than being an agent for them. The other potential buyer noted was Bank of China, the country’s largest foreign exchange lender.