The Fraud-Hunting Short Seller Taunting Bill Ackman on Valeant (Bloomberg)
On Fridays, John Hempton decamps to the solitude of his Sydney beach house, where the locals know nothing of his quirky stock research and focus on sniffing out fraud. The tax official turned hedge fund head, who built an online following by scouring numbers that don’t add up, has also posed as part of a gay couple trying to buy a home beyond their means to build a case for short-selling Australian banks. You’ll find him in Bangkok, talking to prostitutes about the hair dye they use. Or squaring off against billionaire investor Bill Ackman, who says Hempton is nuts. The self-described eccentric has got some big calls right. His Bronte Capital Management Pty has bet profitably against Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and made money on a stake in Herbalife Ltd. (NYSE:HLF), both of which pit him against Ackman. It still holds the positions.
Valuation Quirks Help End Proposed Ploycom-Mitel Merger (The New York Times)
Overpriced Silicon Valley unicorns are not the only technology-sector valuation oddities. Polycom, a struggling videoconferencing company, and its Canadian rival Mitel Networks just created one by scrapping their merger deal. Paul Singer’s Elliott Management originally played matchmaker. Last October, the activist hedge fund bought stakes in Polycom and Mitel and urged them to unite. With Polycom as buyer, Elliott reckoned the stock would more than double in a couple of years. About six months later, the idea came to fruition, albeit with the smaller Mitel acquiring Polycom for $2 billion.
ValueAct Capital Takes 6.8 pct Stake In Alliance Data Systems (Reuters)
Activist shareholder ValueAct Capital reported a 6.8 percent stake in Alliance Data Systems Corporation (NYSE:ADS), which provides credit card and loyalty programs. The $16 billion hedge fund said Alliance Data System’s shares were undervalued and represented an attractive investment opportunity. (bit.ly/29yuVPQ) Alliance Data Systems shares were up 2.8 percent at $206.65 in premarket trading. Plano, Texas-based Alliance Data Systems provides data-driven marketing and loyalty programs serving consumer-based businesses.
Morgan Stanley Has Some Theories for Why Hedge Funds Are Doing So Poorly (Bloomberg)
Poor performance by hedge funds continues to be a hot topic, but no one wants to take the blame for low returns. A survey conducted by Morgan Stanley Equity Strategist Adam Parker highlights the ostrich-like way much of the hedge fund industry is dealing with its recent inability to generate the elusive outperformance known as alpha. “We surveyed a group of long/short fundamental equity hedge fund managers at one of the conferences, asking them for the primary reason for poor performance of their industry,” he writes.