Better Luck Next Year, Private Equity

It is that time of the year; awards for dubious achievement are being handed out all over Wall Street, and of course this year is special. While Hedge Fund of Funds might score top honors in this year's Hall of Shame, Private Equity was not far behind.

Reneging on deals and begging for bailouts was preordained by Jeremy Grantham last summer:

August 2007
Much hand wringing is now taking place over the consequences for private equity if a severe credit crisis were to occur. But the scary point I’m trying to make is that profit margins for companies owned by private equity will come back down under pressure from normal capitalistic competition. With or without a credit crisis, their geese are cooked.

Yes, the state of private equity is not much of a surprise. But it is rather amusing to see Andrew Ross Sorkin underemployed, and his heroes of yesteryear eating shit sandwiches near daily. Cerberus is pathetic, kinda like three "Old Yellers" joined at the hip...and The Deal is taking dead aim at tres doggies:

Partnership from Hell: Private Equity and Paulson

The media fell under the spell of Private Equity in early 2007; CNBC's breathless coverage of the Blackstone IPO pretty much marked the top.

But I was more in Dan Loeb's camp - he does not hold them in such high regard, and unloaded on the industry at one of its very own confabs (roughly 20 months ago):

During an informal question-and-answer session, hedge fund manager Daniel Loeb—seated in the audience—began to criticize private equity firms for hoarding profits that rightly belong to public shareholders. While some attendees may have agreed privately with Loeb, those dinner guests well accustomed to the sanguine navel-gazing of business conferences were taken aback. In the pantheon of audacious acts, Loeb’s behavior was akin to wearing an NRA T-shirt to a peace rally.

But it was clear by the summer of that the salad days of PE were over. Every two-bit blogger jumps on Jeremy Grantham pronouncements now, but few did 18 months ago when he stuck a fork in the industry:

Ackman Unveils Revised Proposal for Target Corp

Media star and part-time hedge fund manager Bill Ackman of Pershing Square Capital Management is back at today, hosting an 11AM teleconference and webcast to unlock value at Target Corp (TGT-NYSE).

The revised transaction addresses each of the concerns raised by the Company in response to Pershing Square's October 29th presentation, and incorporates feedback from shareholders, bondholders, and other market participants. Pershing Square believes that the revised transaction will build long-term value for Target and all of its stakeholders. A live audio broadcast of the presentation will also be available by teleconference. The call can be accessed in the United States by dialing 1-888-674-0219 (internationally by dialing 201-604-0489), with the participant access code of "Pershing Square"

Check out the online presentation here.

With the stock printing 52-week lows going into the meeting, perhaps a prayer is in order. Analysts continue to lower numbers across the board, and eulogies for the American consumer are being read from coast to coast. America was "overstored", and while that is being corrected, until capacity disappears it is going to be rough sledding for the longer term survivors.

SEC Nails Cuban in PIPE Deal

Mark Cuban's dalliance with Mamma.com was bound to end badly. Getting mixed up with Canadian stock promoters is probably questionable to begin with, but trading on material, non-public information is a no-no.

The laws regarding PIPE transactions are clear, and Cuban should have known that the SEC was cracking down on abuses relating to Private Investments in Public Equity.

On June 28th of 2004 the CEO of Mamma.com contacted Cuban, prefacing the communication by stating that he had confidential information to convey. Cuban consented, and in effect went "over the wall" and was restricted from further transactions in the stock, according to securities laws.

After speaking with the Mamma.com CEO over the details of the transaction Cuban allegedly commented "Well, now I'm screwed. I can't sell"

But sell he did, over the next few days.

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