Dan Loeb vs the SEC: It’s a Religious War

Dan Loeb has never been one to back down from a fight, and he has embarked on a new crusade, according to the Financial Times:

It's not pretty, in Pink:

Aggressive activist Dan Loeb’s hedge fund Third Point is being investigated by the Securities and Exchange Commission over talks its managers regularly have with rivals at other funds.

According to Third Point’s quarterly letter to investors last month, first reported by Alpha magazine, the financial regulator has started a “formal investigation” of the $3.3bn fund after being told of the discussions. Mr Loeb - known for his forthright public letters to executives he disagrees with - wrote:

Such conversations permit us to test our hypotheses and refine our thinking and, as a result, we believe that participating in give-and-take with other managers is in the best interest of our investors. Our outside counsel has examined this matter thoroughly and assured us that our position is consistent with the securities laws and that we have not violated any law in connection with these communications. FT Alphaville

Hedgistan is a tight knit community, and talking to neighbors about your latest idea is the fastest way to make a buck, accelerating the inevitable, assuming the thesis is airtight. But Dan is taking exception to the SEC's posture, and lobbing a few shots at the regulators in what might be his finest hour in years:

…the proposed GSE [Fannie Mae and Freddie Mac] bailout is fraught with moral hazard issues. As a friend said to me, “Capitalism without bankruptcy is like Christianity without hell.” Even if the government does not wipe out the subordinated debt and equity in the GSEs, any proposed equity offering would so significantly dilute their value as to effectively let the companies’ management off the hook.

Loeb was caught in the recent maelstrom, short financials and long energy, and has had the devil to pay in recent weeks, giving up ground as the tide turned, temporarily at least.

But he is no doubt digging the recent price action, and getting back chunks of the surrendered performance this week.

But Third Point’s beefed up compliance budget, which is a necessary evil in order to comply with the heightened regulatory environment, holds a silver lining for the large hedge fund complexes. The government has effectively been erecting barriers to entry, and as recent developments in Europe show, and fund flows in both sides of the pond continue to go to the larger, established hedge fund operations.

The regulators can sort through all the emails and Instant Messages they want; intimidating the BuySide and flexing their muscle is not likely to achieve the desired effect.

Free markets for free men!
_________________________________________________________

Give ‘em hell, Dan

______________________________________________________

Hopefully all this nonsense does not cut into Dan’s surfing...that would be the real tragedy here.

Wingnut’s (Loeb’s Surfing Spiritualist/Coach/Compadre) Theme

Surf’s Up: Hedgistan Heads for The Highway (House)
1440 Wall Street
________________________________________________________

Third Point Probe
FT Alphaville

Third Point 2nd Quarter Letter
PDF
-----------------------------------------------------------------------------------------------------------------------
The content contained in this blog represents the opinions of underthecounter. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Position

Comments:

<< Back to main