Archive for 2007

• Novo Nordisk
  Eddy Elfenbein, June 21st, 2007 at 11:47 am

  While American drug companies Merck (MRK) and Pfizer (PFE) aren’t doing well (or at least Merck has bounced off its deep lows rather nicely), check out the performance of Denmark’s Novo Nordisk (NVO):
  
  The stock is up about $5 a share today to $106. I had to cut off the top part of the chart because it’s a logarithmic scale, but you get the idea.

• Stephen Schwarzman’s Foolish Antics
  Eddy Elfenbein, June 21st, 2007 at 9:12 am

  Slate’s Daniel Gross looks at the recent behavior of Blackstone’s Stephen Schwarzman:

  First, he threw himself a (much-covered) 60th-birthday party at the Park Avenue Armory in February. It featured, among others, Martin Short, Rod Stewart, Marvin Hamlisch, and Patti LaBelle leading the Abyssinian Baptist Church choir singing, according to a great article in the Wall Street Journal, “a tune about Mr. Schwarzman.” (“He’s Got the Whole World in His Hands”?) The best bit: “A huge portrait of Mr. Schwarzman, which usually hangs in his living room, was shipped in for the occasion.” (I wasn’t invited, but my gift would have been a first edition of Christopher Lasch’s Culture of Narcissism.)
  Next came a cover story in the March 5 Fortune declaring Schwarzman, who had just completed the gigantic acquisition of Equity Office Properties, “The New King of Wall Street.” Then, only a few months after saying that Sarbanes-Oxley was deterring companies from going public, he filed a huge IPO for the Blackstone Group. If it goes through as planned, according to the Wall Street Journal, Schwarzman’s sale will be worth $7.5 billion. This offering included several wrinkles that solidified Schwarzman’s smartest-guy-in-the-room reputation but also seemed designed to elicit scrutiny. As the Financial Times reported ($ required), the preliminary prospectus said the firm planned to “book profits from private equity at the time an asset is bought”—not when the assets are sold, as most businesses do. More significantly, the offering was structured as a “publicly traded partnership” to take advantage of an absurd wrinkle in the tax code. Under current rules, the asset-management fees that private-equity partnerships like Blackstone reap are taxed not at the 35 percent corporate income-tax rate, but at the 15 percent long-term capital-gains rate, allowing Blackstone to save tens of millions of dollars annually on its tax bill. Finally, in May, at a time when concerns about China’s role in the global economy and its influence on the United States were at a fever pitch, Schwarzman agreed to sell a 10 percent stake in Blackstone to an entity controlled by China’s government.

  The stock is expected to hit the world tomorrow. But now some people are wondering if the share price is too high.

  If Blackstone goes public at $30, its price-earnings ratio (share price divided by earnings per share) would be about 14, based on the company’s 2006 results. By comparison, premier investment bank Goldman Sachs Group Inc., which has a large private equity operation, trades at about 11 times profit.
  Shares of Fortress Investment Group had a price-earnings ratio of about 15 when the company went public in February at $18.50 a share. With the shares now at $26.52, the ratio has risen to about 22.

  Bloomberg reports that the Blackstone underwriting group is being forced to accept a lower in return for more business in the future:

  Morgan Stanley, Citigroup Inc. and the 15 other investment banks that Blackstone hired to distribute shares in today’s IPO will get a 3.6 percent commission, or as much as $170 million, according to regulatory filings. That’s slightly more than half the 6.2 percent average rate banks charged U.S. companies to go public this year.
  The securities firms are accepting the lower fee because they expect to make a lot more arranging and financing takeovers when New York-based Blackstone invests its $19.6 billion buyout fund, the second-biggest ever raised. Schwarzman’s firm paid $571.4 million for those services last year and $248.1 million in the first quarter of 2007 alone, according to estimates by industry consultants at New York-based Freeman & Co.

• This is NOT Happening
  Eddy Elfenbein, June 20th, 2007 at 3:51 pm

  From the AP:

  Rupert Murdoch’s News Corp. is discussing…

  Me running in slow motion

  …swapping social networking Web site…

  waving my arms

  …MySpace…

  screaming

  …for a 25 percent stake…

  Nooooooo…

  …in Yahoo.

  …ooooooooooo!!!!

• Paul Krugman Four Years Ago Today
  Eddy Elfenbein, June 20th, 2007 at 1:24 pm

  The big rise in the stock market is definitely telling us something. Bulls think it says the economy is about to take off. But I think it’s a sign that America is still blowing bubbles — that a three-year bear market and the biggest corporate scandals in history haven’t cured investors of irrational exuberance yet.

  And.

  In short, the current surge in stocks looks like another bubble, one that will eventually burst.

  June 20, 2003

  From a reader:

  He lied! Krugman knew there was disagreement among investment consultants as to whether the market was a bubble or for real, and he intentionally massaged the indicators, and hyped the financial intelligence to make everyone believe there was a link between the current bull market and the bubble of 2000.
  How many people sold their stocks on Krugman’s intentionally misleading misrepresentation and failed to realize the gain that came with the continuing bull market?
  Krugman lied, profits died!

  

• This Just In
  Eddy Elfenbein, June 20th, 2007 at 9:57 am

  Bernanke: Banks still important

• A Good Run Doesn’t Mean a Stock is Too Expensive
  Eddy Elfenbein, June 20th, 2007 at 9:53 am

  A quick note on FactSet (FDS). This is a good reminder that just because a stock is up doesn’t mean it’s too expensive. FactSet was on last year’s Buy List and it rose 37.2% making it our second-best performer. I decided to keep it on this year’s Buy List and it’s up 20.6% so far, again our second-best performer.
  Also, just because a stock is down doesn’t mean it’s cheap. I’ve often heard people say, “how much lower can it go?” The answer is, a lot. A whole lot. I remember my finance professor explaining how low zero is. A $100 stock can drop 90%, then another 90%, then another 90% and it’s still not at zero. In fact, it can drop 90% infinitely and still not be at zero. Zero is really, really, really, REALLY small, and that’s how low it can go.

• Oh Dear Lord
  Eddy Elfenbein, June 19th, 2007 at 5:08 pm

• The Vietnam War Is Officially Over
  Eddy Elfenbein, June 19th, 2007 at 4:04 pm

  We won.

  Mr. Carter added that he was looking forward to the day the first Vietnamese company lists on the NYSE.

  Suck on that, hippies.

• Guess the Stock
  Eddy Elfenbein, June 19th, 2007 at 3:27 pm

  Here’s a 12-year chart:
  
  Give up? Answer is after the jump.

  (more…)

• When Wall Street Couples Cash Out
  Eddy Elfenbein, June 19th, 2007 at 11:38 am

  From the LA Times:

  The flood of cash into so-called hedge fund communities in New York, Connecticut and California has proved fatal to many marriages — and a windfall for lawyers, psychiatrists and forensic accountants who specialize in the superrich.
  “There is no question that a huge infusion of wealth to relatively young people has a disastrous effect on the marriage’s stability,” says Bern Clare, a Manhattan divorce lawyer.
  Divorce hedge fund-style often means the judges involved must cope with pre- and post-nuptial agreements, years of fights over access to hedge fund accounts and monetary demands well into eight and nine figures.
  “When you are dealing with the uber-wealthy, you are dealing with the uber-lawyers,” says Kevin Tierney, the presiding judge of the family division in the Stamford-Norwalk district of Connecticut, where many hedge fund families live. “They have accountants and paralegals and dueling experts.”
  Further complicating matters is that the value of the assets involved, unlike real estate or jewelry, is highly variable, depending on the gyrations of the stock market and other investments.
  “You can have an asset change by $1 million while a witness is on the stand,” Tierney says.