Investment Banking

Alibaba.com: So long, for now

admin — Wed, 22 Feb 2012 22:55:36 +0000

SHAREHOLDERS can be such nuisances. This week the Alibaba group, China’s biggest internet firm, announced that it wants to delist the shares of Alibaba.com, its business-to-business arm, that are traded on the Hong Kong stock exchange. The company, and its founder and chairman, Jack Ma (pictured), made no attempt to sugar-coat the decision.One big motivation for delisting, the parent company said, is to have the freedom to run its offshoot “free from the pressure of market expectations, earnings visibility and share price fluctuations.” It also admitted that its slumping share price had been causing problems inside the company: “A depressed share price may continue to adversely impact?employee morale,” it said.The deal, which will set Alibaba back $2.3 billion, looks likely to succeed. One reason to think so is the hefty premium on offer. A bit over a quarter of Alibaba.com’s shares are publicly traded, and the firm is offering those unhappy shareholders HK$13.50 ($1.74) per share. That matches the offer price of the firm’s initial public offering in 2007, and is roughly 46% higher than the last closing price two weeks ago, when trading in the firm’s shares were halted.Another reason for shareholders to cash in may be that the division’s immediate commercial prospects look dim. The web portal is still recovering from a corruption scandal and has endured a backlash among …

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Alibaba.com: So long, for now

Pedantry: Sometimes, good enough is good enough

admin — Tue, 21 Feb 2012 22:00:35 +0000

TODAY, the Dow Jones Industrial Average flirted with the 13,000 level, prompting lots of people across a number of different media to talk about how the Dow was flirting with the 13,000 level. Of course, there’s no real meaning to the 13,000 level; people just like big, round numbers, and so discussion about how the Dow had returned to this particular level (the last close above 13,000 occurred in May of 2008) seemed somehow more justified than discussion of the index’s attainment of, say, the all-important 12,578 level. A focus on big, round numbers is a little silly.Twitter overflowed, however, with a different sort of disdain: Dow-hating. Matt Yglesias captured the sentiment:With the Dow Jones Industrial Average back over 13,000 it’s worth emphasizing that not only is the stock market different from the economy and an index of 30 large firms different from the stock market, but the Dow is constructed in an absurd manner. Specifically, it’s an average of 30 different stocks that’s what we call price-weighted. That means that if Acme, Inc has 1 million shares outstanding each worth $4 and Genericorp has 2 million shares outstanding each worth $2 you average them out to a price of $3. In a properly constructed index, what you need to do is weight by total market capitalization and see that Acme, Inc. and Genericorp are the same. Doing the weighting the way the Dow does it …

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Pedantry: Sometimes, good enough is good enough

Insider trading in Congress: Taking STOCK

admin — Thu, 16 Feb 2012 15:59:48 +0000

UK Only Article: standard article Issue: A way out of the woods Fly Title: Insider trading in Congress Rubric: Congressmen may still be able to escape prosecution Location: NEW YORK Main image: Mr Bachus has questions to answer Mr Bachus has questions to answer AT LAST they can agree on something. On February 9th, in a spirit of bipartisanship that is rare these days, the House passed a bill making it explicit that members of Congress are not allowed to engage in insider trading and get away with it. The Senate had already passed a similar bill the week before, and Barack Obama has promised to sign it into law. A “60 Minutes” episode that aired on CBS in November, detailing the improper trading of some congressmen, sparked public outrage. Suddenly the Stop Trading on Congressional Knowledge (STOCK) Act, which had attracted little support since it was first introduced in 2006, became as popular as Facebook’s initial …

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Insider trading in Congress: Taking STOCK

The lexicon of hedge funds: From alpha to smart beta

admin — Thu, 16 Feb 2012 15:59:48 +0000

UK Only Article: standard article Issue: A way out of the woods Fly Title: The lexicon of hedge funds Rubric: The industry’s language is changing Dear investor, In line with the rest of our industry we are making some changes to the language we use in our marketing and communications. We are writing this letter so we can explain these changes properly. Most importantly, Zilch Capital used to refer to itself as a “hedge fund” but 2008 made it embarrassingly clear we didn’t know how to hedge. At all. So like many others, we have embraced the title of “alternative asset manager”. It’s clunky but ambiguous enough to shield us from criticism next time around. We know we used to promise “absolute returns” (ie, that you would make money regardless of market conditions) but this pledge has proved impossible to honour. Instead we’re going to give you “risk-adjusted” returns or, failing that, “relative” returns. In years like 2011, when we delivered much less than the S&P 500, you may find that we don’t talk about returns at all. In this sectionBeyond the edge The …

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The lexicon of hedge funds: From alpha to smart beta

The best and worst stocks of the past decade: Invest in a time machine

admin — Thu, 16 Feb 2012 15:59:48 +0000

UK Only Article: standard article Issue: A way out of the woods Fly Title: The best and worst stocks of the past decade Hindsight can be frustrating. We kick ourselves for not buying Apple shares ten years ago, when they were $12.50 each. On February 13th they rose above $500. So $100 invested in Apple in February 2002, around the time it unveiled its redesigned iMac, would be worth almost $4,000 today. The same investment in Sberbank, Russia’s biggest state-owned bank, would now be worth more than $3,700. But cheer up. We can at least be grateful that we didn’t buy shares in Allied Irish Banks or AIG. Bets of $100 in those firms ten years ago would now be worth $1.33 and $2.21 respectively. Western financial institutions have been by far the worst investment of the past decade. As for the next one, who knows? (Because this chart looks at the 200 biggest existing companies that also existed in 2002, it ignores both new and recently bankrupt firms.) In this sectionToo many cars, too few buyers Fallout A dark day for LightSquared FRAND or foe? »Invest in a time machine Mind your language From summit …

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The best and worst stocks of the past decade: Invest in a time machine

European financial regulation: Laws for all

admin — Thu, 16 Feb 2012 15:59:48 +0000

UK Only Article: standard article Issue: A way out of the woods Fly Title: European financial regulation Rubric: Lots of rules, but not all good ones Location: BRUSSELS WHEN Michel Barnier, a former French foreign minister, became European commissioner for the single market two years ago, he pledged that “every financial actor, financial market, financial activity and product” would be properly regulated so that taxpayers never again pay for speculators. His staff have churned out draft laws as he seeks to enact a battery of G20 commitments by the end of his term in 2014. Mr Barnier likes to hold up a chart tracking his 20-odd proposals as they change from green (forthcoming rules) to orange (under negotiation) and mauve (adopted). The spreadsheet highlights the differences with the parallel regulatory process across the Atlantic. America’s Dodd-Frank act is a single overarching law that directs agencies to issue more detailed regulations. The EU, by contrast, is methodically regulating sector by sector, …

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European financial regulation: Laws for all

Daily chart: The Apple of investors’ eyes

admin — Tue, 14 Feb 2012 17:34:29 +0000

Investments in dotcoms and national giants a decade ago would have reaped great rewardsHINDSIGHT can be illuminating and frustrating. Ten years ago a share in Apple would have set you back $12.50. Yesterday, thanks partly to recent news of record profits for the final quarter of 2011, the technology giant’s share price rose above $500 for the first time. A hundred dollars invested in Apple in February 2002, around the time it unveiled its redesigned iMac, would have swelled to almost $4,000 today. The same investment in Sberbank, Russia’s biggest state-owned bank, would now be worth more than $3,700. The decade has not been so kind to a number of western banks. A $100 stake in Allied Irish Banks and AIG would be worth $1.33 and $2.21 respectively. As the chart looks at the 200 biggest existing companies that also existed in 2002, it necessarily ignores both new and recently bankrupt firms.

Banker bashing in Britain: The British lose faith in meritocracy

admin — Thu, 09 Feb 2012 18:14:39 +0000

MY PRINT column this week looks at the British debate about high pay, and suggests that the row is about more than bonuses and banks. Somewhere in amongst the public rage, I think the British are losing faith in the idea that they live in a meritocracy.TWICE during the 1970s, a stroppy decade, leftish British politicians tried to turn the monarchy into a nationalised industry. There were plans to place Queen Elizabeth II and a few close relatives on state salaries and sack the rest of her family, and—a few years later—for a Department for Royal Affairs, bringing the crown under Whitehall’s management. Both attempts were resisted. Since then, royal aides have cannily worked to secure autonomy and arms-length financing from government. Just now, the mood behind palace walls must be giddy relief. The queen has rarely been as popular as she is now, in her Diamond Jubilee year. The contrast with other arms of the establishment is striking, and revealing. For most people at the top of the public sector, this is a perilous time.For months there has been angry scrutiny of the sums paid to the bosses of public or publicly controlled bodies, from the BBC to the railways and the bailed out Royal Bank of Scotland (RBS). The BBC says that its next director-general will take a big pay cut. Network Rail directors this week bowed to ministerial nagging and promised to donate …

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Banker bashing in Britain: The British lose faith in meritocracy

Corporate governance: Not King Coal

admin — Thu, 09 Feb 2012 16:02:40 +0000

UK Only Article: standard article Issue: How to set Syria free Fly Title: Corporate governance Rubric: The Rothschild-Bakrie marriage hits the rocks Location: JAKARTA AND LONDON IN AN early episode of “Sergeant Bilko”, a 1950s TV comedy, the eponymous hero rents an empty store. His fellow soldiers, convinced that the army’s “smartest operator” sees a business opportunity, beg to be made partners. Not all do well out of the deal. Nat Rothschild also has a name that inspires confidence among investors. The scion of a European banking dynasty (some of whose members own stakes in The Economist), Mr Rothschild raised £707m ($1.08 billion) to create his own empty store, a London-listed “cash shell” named Vallar. He then used the cash to buy stakes in two coal-mining ventures in Indonesia associated with the Bakrie group, a family-owned conglomerate. Bumi PLC, the British-based company that emerged with Mr Rothschild as co-chairman, appealed to cautious punters who might otherwise have shied away from risky …

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Corporate governance: Not King Coal

Short-selling: Getting to the naked truth

admin — Thu, 09 Feb 2012 16:02:40 +0000

UK Only Article: standard article Issue: How to set Syria free Fly Title: Short-selling Rubric: A regulatory probe sheds light on manipulative shorting Location: NEW YORK Main image: Bear raids can happen Bear raids can happen SHORT-SELLERS perform a valuable function in financial markets, exposing managerial incompetence, corporate fraud or plain overvaluation. Their reward, all too often, is calumny. Witness regulators’ rush to ban shorting in 2008 in response to sustained political attacks on the practice. Like any form of trading, however, shorting is open to abuse. Some firms claim to have been victims of illegal “naked” shorting, where the seller does not arrange to borrow the shares in time to deliver them to the buyer within the standard settlement period. This, they say, has long been a favoured tool of unprincipled traders looking to launch bear raids—usually on small stocks but also, in times of turmoil, …

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Short-selling: Getting to the naked truth