Category Archives: Finance

Partners Hedge Fund Investigation

images-27The Platinum Partners saga may have further twists in store.

The New York-based hedge fund has begun liquidating its funds, after the firm’s longtime associate Murray Huberfeld was accused last month of arranging for a $60,000 kickback to be delivered — in a Salvatore Ferragamo bag — to a correctional officers’ union official in exchange for directing the union’s retirement fund investments to Platinum.

Now, Platinum and its chief investment officer, Mark Nordlicht, may face scrutiny as the probe widens, according to a report from the Wall Street Journal.

Platinum’s woes began with the June 8 announcement of bribery charges against Huberfeld and Norman Seabrook, president of the New York City Correction Officers Benevolent Association.

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Prosecutors say that Huberfeld, through an intermediary, arranged for the delivery of the kickback to Seabrook after the union official directed $20 million in union investments into the Platinum Partners Value Arbitrage Fund. Huberfeld then arranged for the hedge fund to reimburse the intermediary for the kickback using a fraudulent invoice for the purchase of New York Knicks basketball tickets, the U.S. Attorney’s Office said. Both Seabrook and Huberfeld pleaded not guilty to the charges on Friday.

The fund itself had not been implicated in the criminal case against Huberfeld, whom prosecutors describe as a co-founder and manager at Platinum, claiming he was not listed on the firm’s registration documents to avoid scrutiny. Huberfeld has been previously fined by the Securities and Exchange Commission.

Federal agents raided Platinum’s office in late June, after the charges were announced, as part of an investigation that’s reportedly separate from the bribery case. And there are other rumblings of wider fallout.

Drastic Restructuring as Profit Falls

Deutsche Bank  (DB) CEO John Cryan said the bank may need to step up its restructuring program as it reported a 98% decline in quarterly net profit to €20 million ($22 million).

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Germany’s leading lender said it has already arranged to cut 3,000 jobs in its home market, pour its U.S. operations into an intermediate holding company and to separate retail lender Postbank, which it wants to partially spin off next year. The company delivered the update as it announced a 20% decline to €7.4 billion in quarterly revenue, which it said reflected a “challenging environment and strategic decisions.” Its core equity Tier One ratio rose to 10.8% from 10.7%, in line with expectations, while the €20 million net profit figure was below the €22 million consensus in a Bloomberg forecast.

“While our results show that we are undergoing a sustained restructuring, we are satisfied with the progress we are making,” said Cryan. “We have continued to de-risk our balance sheet, to invest in our processes and to modernize our infrastructure. However, if the current weak economic environment persists, we will need to be yet more ambitious in the timing and intensity of our restructuring.”

Deutsche Bank shares closed down 1.9% at €12.88. They have lost 57% of their value in the past year.

We’ll have a full story later.

Know the Apple Earnings Live

It’s that time of the quarter again when Apple (AAPL) reports its earnings, and analysts and investors breathlessly dissect news of the tech giant’s latest results and guidance. For its fiscal third-quarter earnings, which will be released after the close on Tuesday, analysts are expecting fairly modest results, with consensus estimates calling for earnings per share to drop to $1.40 from $1.85 a year earlier, and revenues to fall to $42.2 billion from $49.6 billion as iPhone sales continue to slow.

TheStreet’s Jim Cramer, who owns Apple in his Action Alerts PLUS Charitable TrustPortfolio, thinks that Apple will miss estimates “given inputs from multiple suppliers.” Of greater interest than its actual quarterly performance, however, will be Apple’s plans for its next iPhones. Speculation is that the iPhone 7, which is expected to be released this fall, may only feature incremental improvements, which would be a departure from Apple’s pattern in the past.

Facebook Crush Earnings Expectations

Mark Zuckerberg will tell investors Wednesday if Facebook’s (FB) impressive growth continued in the second quarter, or whether SnapChat and other forces are slowing the social media giant.

Wall Street expects the company to generate earnings of 81 cents per share from just more than $6 billion in sales, according to FactSet.

Video is also likely to be a point of emphasis.

“Zuckerberg says we are at the beginning of the golden age of online video,” Jefferies analyst Brian Pitz wrote in an earnings preview on Monday, noting that live videos generate 10 times as many comments as regular videos.

While video is promising, Pitz cautioned that millennials are increasingly connecting on Snapchat. “Given that engagement is the key ingredient to [Facebook]’s recipe for success, any engagement declines should be viewed with caution,” the analyst wrote.

Wall Street expects the company to generate earnings of 81 cents per share from just more than $6 billion in sales, according to FactSet.

“Mobile has been the main driver of growth to date,” Cantor Fitzgerald analyst Youssef Squali wrote in an earnings preview. Video and Instagram will begin to “move the needle” in the second half of the year, he wrote, while Messenger, WhatsApp and virtual reality offering Oculus provide longer-term opportunities.

TheStreet’s Jim Cramer, who owns Facebook in his Action Alerts PLUS Charitable Trust Portfolio, said he is concerned that confidence in Facebook has gotten “a little too high,” but noted that large companies like Coca-Cola  (KO) are advertising on Facebook.

Chipmakers That Could Be Acquired

As chip giant Analog Devices (ADI) turns to M&A to better compete in the semi universe by agreeing to pay nearly $15 billion for Linear Technology (LLTC) , investors are looking at which other chipmakers could end up being acquired.

Analog Devices announced Tuesday afternoon that it has agreed to purchase Linear Technology for $14.8 billion, or $60 per share, in cash and stock. The combined entity will have about $5 billion in annual revenue and have an enterprise value of $30 billion.

Shares of Analog Devices were trading up around 1.4% Wednesday early afternoon to $63.78. Linear Tech was down 4% to $59.99, but the stock had shot up over 20% late Tuesday on the deal announcement.

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“Now this is an important deal,” said Jim Cramer, founder of TheStreet. “Why is it important? Because Analog, David Faber said, might have been in the sights ofTexas Instruments (TXN) , which had a monster quarter. This could have been a defensive deal. Linear is an industrial, Internet-of-things automobile play.”

The tie-up will combine two strong analog product portfolios and cultures, MKM Partners analyst Ian Ing wrote in a Wednesday note, adding that joining the Analog Devices umbrella may re-energize Linear Tech that has somewhat lacked growth.

“We see abundant opportunities for the companies to share the best practices, especially in how to sell successfully in high-volume consumer … and cost disciplines,” Ing noted.

He further explained that the purchase price represents a range of about 26 times to 28 times EPS and isn’t overly expensive especially given the $150 million in synergies the buyer is anticipating within 18 months of close.

Amid Brexit Uncertainty

The U.K.’s Lloyds Banking Group (LYG) said on Thursday it would cut another 3,000 jobs by the end of next year and close 200 branches amid expectations of a Brexit-induced slowdown.

Britain’s leading mortgage lender made the announcement as it announced a more-than-doubling of net profit to £1.86 billion ($2.6 billion) in the first half as so-called conduct provisions, reflecting Lloyds’ bill for compensation due to customers for “mis-sold”payment protection insurance and other misdemeanors, plunged. On an underlying basis profit slipped 5% to £4.16 billion. Jefferies noted that profit came in about 4% above consensus expectations.

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“Following the EU referendum the outlook for the U.K. economy is uncertain and, while the precise impact is dependent upon a number of factors, including EU negotiations and political and economic events, a deceleration of growth seems likely,” said CEO Antonio Horta Osorio in a statement.

The company kept most of its forecasts intact but said capital generation “may be somewhat lower” in the future than previously anticipated because of economic uncertainty.

Lloyds also said it would lift its run-rate cost-savings target to £1.4 billion from £1 billion by the end of next year and slash its non-branch property portfolio by 30% by the end of 2018.

“We believe an incremental £200m cost reduction target was already embedded in investor expectations, so this is incrementally positive,” noted Jefferies analyst Joseph Dickerson.

At the end of the first half, Lloyds said it had a core Tier One equity ratio of 13%.

The bank is still part-owned by the state after a credit-crisis-era bailout when the government brokered the purchase of the failing HBOS by Lloyds.

Capital Distribution Plan

CIT Group Inc.’s (CIT) shares traded up slightly early Thursday on news it beat analyst estimates slightly even though it also revealed that the Federal Reserve had privately given its capital distribution plan a “qualitative objection” over concerns around risk management.

In addition, CIT Group also disclosed that it received a negative charge from a reverse mortgage servicing unit it obtained as part of its blockbuster 2015 merger with OneWest.

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Nevertheless, CIT Group’s adjusted earnings in the second quarter per share beat analyst expectations. It had adjusted earnings of $0.80 a share when taking into account an after-tax charge of $163 million related to problems with the reverse mortgage servicing business, Financial Freedom. It acquired the unit as part of its $3.5 billion merger with OneWest in 2015. This beat an aggregate mean earnings-per-share estimate for CIT Group collected by FactSet for the quarter of $0.78 a share.

“The qualitative objections to CIT’s first [stress test] submission, with only modest buybacks allowed, is likely to weigh on the shares today,” noted Keefe Bruyette & Woods analysts in a report Thursday. “Noisy quarter with a large loss related to the legacy OneWest Financial Freedom reverse mortgage business, which was moved to discontinued operations..”

In a call with analysts Thursday, CIT Group CEO Ellen Alemany said the company is “fully cooperating” with a previously disclosed investigation being led by the U.S. Housing and Urban Development agency’s Office of Inspector General into reverse mortgages, which began shortly after the close of the OneWest acquisition last year.

Sales Edge Above Forecasts

unduhan-34Pharmaceuticals company AstraZeneca  (AZN) reported smaller-than-expected declines in quarterly revenue and earnings and said progress on the development of new products boded well for a return to growth.

Revenue fell 11% in the second-quarter to $5.6 billion after the company lost exclusivity on the Crestor anti-cholesterol statin in the U.S. in May. The figure was slightly better than consensus expectations for just under $5.5 billion of revenue, while earnings per share of 83 cents, down 31% year-on-year, compared with a forecast for 82 cents.

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AstraZeneca is pinning its hopes on a new product pipeline as it strives to lift revenue to $45 billion by 2023 from $24.7 billion in 2015. Three products on which it has is or is about to lose patent protection by the end of next year – Nexium for heartburn, Seroquel for schizophrenia , as well as Crestor, account for almost 40% of revenue.

CEO Pascal Soriot said the pipeline is progressing, and that recently introduced, and patented, drugs are doing well.

“Our growth platforms continued to advance and made up over 60% of total revenue. Importantly, our transformed pipeline is advancing quickly and delivering a rich flow of differentiated medicines, boding well for our return to growth.”

AstraZeneca’s pipeline products include benralizumab for severe asthma, which would compete against a product being developed by GlaxoSmithKline (GSK) and for which it expects to seek approval from U.S. and European regulators in the second half. They also include the Faslodex breast cancer treatment and Tagrisso for lung cancer.

Come True In Oracle Deal

Shares of NetSuite  (N) are rallying after the announcement that the company has agreed to be acquired by Oracle  (ORCL) . This comes after long-standing rumors of a possible tie-up of the two were rekindled in recent weeks, though those rumors were dismissed by many Wall Street analysts.

WHAT HAPPENED: Oracle announced this morning that it has entered into a definitive agreement to acquire NetSuite, “the very first cloud company.” The transaction is valued at $109 per share in cash, or approximately $9.3B. The transaction is expected to close this year.

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RECENT RUMORS DISMISSED: Last week, SunTrust analyst John Rizzuto told investors he did not believe Oracle would buy NetSuite after financial blog Proactive Investors reported on a possible deal, saying he saw the synergies from such acquisition as limited. Further, he questioned the blog’s credibility after it recirculated rumors of a pending deal for the third time in the previous three weeks. Rizzutto also noted that no other major news source had reported on a similar story at the time. The analyst said Oracle would be “ill-advised” to buy NetSuite. Rizzuto was not the only one doubting that an acquisition would take place. On June 13, Ross MacMillan, his peer at RBC Capital, shared a similar opinion, placing a “low to medium” probability on the deal given a mixed strategic rationale and challenges of integration. Nonetheless, MacMillan speculated that if an acquisition took place, the fair value would be $100-$110 per share as suggested by recent comparable transactions. Also on that day, in a separate note to investors, Cowen analyst J. Derrick Wood said he saw little merit to such a buyout argument, citing major product overlap, regulatory and legal risks, and little margin leverage that would be gained by Oracle in acquiring NetSuite.

Amazon Effect in Retail

When (AMZN) reports second-quarter earnings Thursday after the markets close, all eyes will be on the e-commerce giant’s retail and cloud computing businesses.

On average, analysts are expecting $29.56 billion of revenue and $1.11 of earnings per share. Amazon posted $23.18 billion in sales and 19 cents of EPS during the corresponding period a year ago.

“We believe Street estimates for the quarter are reasonable,” wrote RBC Capital Markets analyst Mark Mahaney in a recent note.

Margins will be a critical factor for the second quarter, he noted, while acknowledging that investments in international markets, Amazon Web Services (AWS) and Pillar Projects will weigh on the Seattle-based company’s profitability.

Retail revenue growth in North America and overseas will also be an important data point for Amazon, Mahaney added.

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Should retail and AWS hold up, Amazon will likely post another solid quarter, said Maxim Group analyst Tom Forte in an interview.

“I’d be careful and sell some of the other retailers that have moved up here ahead of Amazon,” said founder of TheStreet Jim Cramer.
“That may be a more important story/ Amazon may be taking an increasing part of the pie.”

Amazon has been on a solid run this year, with stock up about 9.1% year to date. Shares closed up about 1.1% to $736.67 per share on Wednesday and traded up $10.78, or 1.5%, Thursday to $747.82 per share.

AWS, which competes with Microsoft’s (MSFT) Azure and Alphabet’s (GOOGL) Google Cloud Platform, has emerged as Amazon’s engine of growth thanks to the tech market’s ongoing shift to cloud from hardware. Last year, Amazon saw its cloud revenue grow by an impressive 70% to $8 billion.