DealBook Today's Top Headlines - June 16, 2016: Visium Hedge Fund Managers Charged With Insider Trading | Tencent Nears Deal to Buy Maker of Clash of Clans | Investors Bypass Private Equity
Thursday, June 16, 2016
TODAY'S TOP HEADLINES
By AMIE TSANG
VISIUM HEDGE FUND MANAGERS CHARGED WITH INSIDER TRADINGFederal
authorities filed criminal and civil securities charges against three
current and former traders at Visium Asset Management, a
multibillion-dollar hedge fund focused on health care,
Alexandra Stevenson reports in DealBook. Prosecutors said that the
fund had an inside view of the drug approval process at the Food and
Drug Administration that gave it trading windfalls of $32 million.
Gordon Johnston, a former deputy director of the office of generic drugs
who became a consultant, is accused of leveraging his F.D.A. contacts
and abusing his role at the Generic Drug Trade Association, to glean
information on behalf of Sanjay Valvani, one of Visium's top portfolio
managers. The authorities said Mr. Johnston arranged speaking panels and
teleconferences between F.D.A. officials and generic drug manufacturers
to discuss issues that directly concerned his hedge fund client.
Mr. Valvani was able to reap nearly $32 million in illicit gains
based on information about coming approvals for a generic version of a
drug that helps prevent blood clots, according to court filings.
Prosecutors also accused Mr. Valvani of passing on the tips to
Christopher Plaford, a former colleague.
Mr. Plaford has pleaded guilty to trading on illegal tips. Mr. Johnston
has also pleaded guilty and they are both cooperating with the
Mr. Valvani's lawyer, Barry H. Berke, said his client was innocent. "The
prosecution of Mr. Valvani is yet another example of this United States
attorney's office stretching the facts and law to try to transform
entirely innocent trading decisions into a crime," he said.
The networks used by hedge funds to get an investing edge were the focus
of a crackdown by Preet Bharara, the United States attorney in
Manhattan, that resulted in the convictions of more than 80 traders,
consultants and analysts.
Although Mr. Bharara's office was dealt a blow when a federal appellate court overturned two prominent convictions from 2014, it has gained momentum again in the last month.
Tencent, with a market value of about $211 billion, controls the
messaging service WeChat as well as a number of online games hosted on
its QQ portal. A deal for Supercell would be the biggest takeover by any of China's so-called BAT trio of Baidu, Alibaba and Tencent, according to data from Standard & Poor's Global Market Intelligence.
Supercell has produced a string of hits like Clash of Clans, Hay Day and
Clash Royale. It reported revenue of $2.33 billion for 2015, up from
$1.78 billion the previous year. Its earnings before interest, tax,
depreciation and amortization also rose to $964 million, from $592
million. Tencent is already China's dominant online game company,
accounting for about 32 percent of revenue from China's online game
market in 2015, according to the research firm Niko Partners.
Under the terms of the proposed deal, Tencent would buy the roughly 73 percent stake in Supercell that is held by SoftBank,
the Japanese telecommunications provider, said a person briefed on the
discussions. Supercell's founders would remain at the company.
The Wall Street Journal, which earlier reported the discussions, said that Tencent was also in discussions with financial investors, like Hillhouse Capital Group of Beijing, to join the deal as co-investors.
ON THE AGENDA Oracle will hold a call on its latest earnings at 5 p.m.
INVESTORS BYPASS PRIVATE EQUITYSovereign
wealth funds, pension funds and even private families have been flexing
their deal-making muscles and taking stakes in companies themselves,
Leslie Picker reports in DealBook.
These so-called emerging buyers are looking for investment gains without paying management fees to private equity firms.
Over the last year and a half, they bought about 17 percent of the
assets sold by private equity firms, up from 2 percent in 2007,
according to Goldman Sachs data. They were even more active as buyers
than private equity firms themselves.
They are investing in every sector around the world. Saudi Arabia's main
investment fund took a $3.5 billion stake in Uber this month. JAB
Holding Company, the investment arm of the Reimann family in Germany,
led the acquisition of Keurig Green Mountain for about $14 billion in
The risks, however, are higher for these newcomers because they
do not have the same people to find and vet deals that a private equity
firm or a bank would have. But banks are stepping in - Goldman Sachs
plans to expand its financial sponsors group to focus more on emerging
Emerging buyers are also taking steps to make their internal deal-making departments more professional. Three years ago, Abu Dhabi's sovereign fund created its own group, which now has 15 people, to focus on direct investments.
Emerging buyers are also making deals in conjunction with private equity firms, a practice known as co-investing.
This gives private equity firms access to a larger pool of capital to
make bigger acquisitions, while it allows investors, whom they call
limited partners, to pay few or no fees. Of 140 limited partners
surveyed last year by PricewaterhouseCoopers, 73 percent said they had
co-invested in at least one deal.
FireEye Said to Have Rebuffed Takeover Offers FireEye, the
online security company, turned down at least two suitors, Bloomberg
reports, citing people with knowledge of the matter. One of the
potential buyers was Symantec.
Picasso Sculpture in Dispute Goes to Leon Black; Rival Owner to Receive CompensationThe Gagosian
had bought the piece from Maya Widmaier-Picasso in 2015 and sold it to
Mr. Black; but the Qatari royal family said it bought the work in 2014.
Didi Chuxing's $28 Billion Valuation Shows High Price of China's Ride-Sharing MarketThe car-hailing
app brought in $7.3 billion in its latest fund-raising round, giving it
a valuation of almost half that of Uber, its main rival in China.
Zuckerberg Venture Makes Its First Investment The Chan
Zuckerberg Initiative, formed by the Facebook founder Mark Zuckerberg
and his wife, Priscilla Chan, plans to announce an investment in Andela,
a start-up based in New York that trains software developers in Nigeria
Airbnb Adds $1 Billion to War Chest for ExpansionAirbnb secured a
$1 billion debt facility from some of the largest banks in the United
States to help develop new services and fund growth initiatives,
Bloomberg reports, citing people familiar with the matter.
Fed Holds Interest Rates Steady and Plans Slower IncreasesThe central
bank, which entered the year planning to raise rates four times, has
scaled back those plans as economic growth has disappointed
The Fed Is Learning Just How Hard the Exit From Easy Money Will BeIf markets
could talk, they'd be saying to the chairwoman of the Fed, Janet Yellen:
"We don't think you'll raise interest rates as much as you say you
Iran Files Complaint to Recover $2 Billion"The government
of the Islamic Republic of Iran officially complained about America to
the International Court of Justice for the confiscation and theft of $2
billion of the property of the central bank," President Hassan Rouhani
House Panel Recommends Censure of I.R.S. CommissionerThe Oversight
and Government Reform Committee recommended that the House censure the
commissioner, John A. Koskinen, accusing him of betraying the trust of
Congress and the public.
Why the I.R.S. Fails to Crack the Small-Business Tax NutThe government
has been trying to figure out how small-business owners can be persuaded
to report their earnings more accurately. More audits may not be the
Expiration Date on China's Promises Stokes Unease in Hong Kong HousingMost banks have
yet to formulate mortgage policies beyond 2047, when an agreement
guaranteeing the city a high degree of autonomy runs out.
To Secure Loans, Chinese Women Supply Perilous Collateral: Nude PhotosWomen are
sending photos of themselves to peer-to-peer lenders, who then sometimes
blackmail them when they cannot pay high interest rates, Chinese state
news media reported.