Unstructured Finance

John Paulson and his god-like status

By Matthew Goldstein

By most objective measures, hedge fund magnate John Paulson isn’t having a particularly good year.

His Paulson Advantage Plus fund lost nearly 6 percent in May. His Paulson & Co. fund empire is believed to have absorbed a $300 million paper loss when shares of Sino-Forest got hammered in the wake of a critical report from a noted short-seller, who claims the company has overstated the value of its lumber holdings. And the bullish bet he’s made on a rebound in the housing market appears to be several years too early.

Then again, this is John Paulson–the mastermind of the mega subprime housing bet, which bolted him to fame and riches and certified his rock star status in the $2 trillion hedge fund industry. Today, his New York firm controls about $37 billion in assets and seems to keep taking in new investor money every day.

So even though his $9 billion Paulson Advantage Plus is in the red this year–other Paulson funds are doing quite well. For instance, Paulson’s Enhanced fund is up 11.5 percent for the year.

The big question is:  Will Paulson’s reputation in the industry will be enough to overcome the mixed the performance of his fund’s at the half-way mark?

Falcone really loves LightSquared

By Matthew Goldstein

Phil Falcone’s love for all things wireless and his upstart telecom company called LightSquared is well-known. Indeed, he’s gambled the future of his Harbinger Capital Partners hedge fund on LightSquared being a commercial success.

Earlier this week, we reported that Falcone was planning to deal with the high-level of redemptions at his hedge fund by giving withdrawing investors “shares” in LightSquared as an alternative to outright cash. Here’s Falcone telling investors why he is so bullish on bringing 4G high-speed wireless technology to the masses:

LightSquared’s success over the past year underscores my view of the inherent value of this asset to our investors. Moreover, the tangible progress LightSquared is making in its commercial and strategic relationships further reinforces my belief that LightSquared is an investment capable of generating enhanced returns over time. While we have had opportunities to monetize a portion of our LightSquared position in recent months, I feel strongly that any sale by our funds of an interest in LightSquared would have been premature and would not only have jeopardized the ability to join forces with a strategic partner, but also would have limited the substantial upside that I am convinced will come to all of our investors as our plan is executed.

Deals wrap: Waiting for a hostile bid

The head of TMX Group said on Friday a hostile bid could come “any day now,” as a consortium of banks and pension funds prepares to take their approximately $3.7 billion offer for the Canadian exchange operator straight to its shareholders.

Live Nation Entertainment is in talks with its largest shareholder Liberty Media on taking the concert promoter and ticketing company private, the New York Post reported, citing sources familiar with the matter.

Nokia said it was still in talks with “multiple parties” about its stake in Nokia Siemens Networks, after a report that U.S. private equity firms had backed away from bidding for a majority stake.

Dan Loeb looks to the east

By Matthew Goldstein

Is hedge fund manager Dan Loeb considering planting his Third Point flag somewhere in Asia?

A person close to the New York-based fund says Loeb has no plans to open an outpost in Asia. But investors familiar with Third Point are fueling speculation that Loeb may be considering doing that at some future time.

The speculation about Loeb’s interest in Asia may be the result of a two-week tour Loeb took of China and Hong Kong earlier this spring. The visit was part vacation/part educational for Loeb.

Deals wrap: Nokia rumors but no suitors

Nokia’s plunging share price and persistent speculation it might be a takeover target is far from attracting real suitors interested in saving the struggling mobile phone company, write Victoria Howley and Tarmo Virki.

General Motors is considering putting Opel up for sale again as management is losing confidence that the European arm will return to profitability, two German magazines reported.  Here’s a timeline of the twists and turns in Opel’s ownership.

Former BP  boss Tony Hayward and financier Nathaniel Rothschild aim to raise around $1.6 billion with a June listing of an acquisition vehicle that will target oil assets.

Deals wrap: Is the PE industry overpaid?

Stephen Feinberg, one of the best-known private equity financiers in the world, admitted that the industry is radically overpaid. The stunning admission was followed by another one: some private equity firms were increasing their fund size too much — potentially hitting the returns for their investors.

Barnes & Noble’s third-largest shareholder, money manager Aletheia Research and Management, reported a reduced stake in the company, weeks after John Malone’s Liberty Media offered to buy the bookstore chain for $1 billion.

Citigroup has agreed to sell a portfolio of private equity assets to AXA Private Equity for $1.7 billion, the French insurer said on Wednesday, the latest move by the U.S. bank to unload non-core assets.

David Einhorn’s nothing month

By Matthew Goldstein

If numbers told the entire story, one might conclude that hedge fund manager David Einhorn took the month of May off.

That’s because Einhorn flagship fund at his Greenlight Capital registered a big nothing for the month. In other words, Greenlight’s flagship fund registered a zero percent gain/loss, according to my colleague Svea Herbst-Bayliss.

Of course, May was a very big busy month for Einhorn. At the annual Ira Sohn charitable event, Einhorn unleashed a blistering attack on Steve Ballmer, in which the 42-year-old hedgie called for the ouster of the Microsoft chief executive officer. Then, the very next day, Einhorn announced he had reached a deal with New York Mets owner Fred Wilpon to buy a minority stake in the Major League Baseball team for $200 million.

Deals wrap: Bid for ING Direct USA

General Electric and Capital One have submitted bids for ING’s U.S. online banking operations in a deal worth about $9 billion, Bloomberg reports.

The frothy market for Internet IPOs is raising the specter of a bubble, underscoring how little has changed despite lawsuits and investigations in the wake of the 1990s dot-com craze.

Maple Group Acquisition Corp, which has gone hostile with its $3.7 billion offer for Toronto Stock Exchange operator TMX Group , is in talks to add at least three other financial-services companies to its consortium, the Wall Street Journal reports, citing sources.

Are marathon runners trying to sprint?

“The long is short. Investment choice, like other life choices, is being re-tuned to a shorter wave-length.” So stated Andy Haldane of the Bank of England in a speech last month.

If one of the key features of a mutual fund is that it is a long-term investment, then concerns that money is being managed over decreasing time horizons should be treated seriously.

This concern was made all the more potent as it followed soon after a European Commission green paper also pointed to this issue with this comment: “It appears that the way asset managers’ performance is evaluated and the incentive structure of fees and commissions encourage asset managers to seek short-term benefits.”

Deals wrap: Pricing Prada

Prada is pricing its initial public offering in Hong Kong to raise up to $2.6 billion and give the maker of luxury bags and Miu Miu dresses a value higher than its European peers, a source said.

With Europe’s market for new stock market listings in the doldrums, some bankers and investors say larger IPO discounts are the answer. Easier said than done, write Kylie MacLellan and Tommy Wilkes.

Daimler and Rolls-Royce have secured a 60 percent stake in engine maker Tognum with a sweetened takeover bid, expanding their presence in higher margin industrial diesel engines.