Cadian Capital Management LLC, a hedge fund run by Eric Bannasch, raised his stake in MF Global Holdings Ltd. (MF) early last week only to slash the holdings days later as the trading and futures firm collapsed.
Cadian, which owned 10.2 million MF Global shares at the end of the second quarter, reported in a regulatory filing late yesterday that it had purchased an additional 10.6 million shares as of Oct. 25. The firm reversed gears on Oct. 27 and 28, selling more than 7.7 million MF Global shares, according to a second filing with the U.S. Securities and Exchange Commission.
MF Global, the holding company for the futures broker run by former New Jersey Governor and ex-Goldman Sachs Group Inc. Co-Chairman Jon Corzine, lost 67 percent last week after wagering $6.3 billion of the firm’s own money on sovereign European debt in a bid to increase profits. The firm had its credit rating cut by Moody’s Investors Service on Monday last week, announced its largest quarterly loss ever on Tuesday, and by Thursday was seeking a buyer for its futures brokerage. MF Global filed for bankruptcy protection yesterday.
Bannasch, a former managing partner at Perry Capital who formed Cadian in October 2007, didn’t immediately return a telephone call seeking comment.
His sales last week of MF Global shares may have locked in losses for Cadian, which has about $1.8 billion in assets under management, according to an investor presentation filed in October with the SEC.
Locking in Losses
MF Global traded at an average price of $5.53 a share between July 1 and Oct. 25, when Cadian doubled its stake to 20.8 million shares, the equivalent of a 12.6 percent stake. The fund’s sale of 7.7 million shares last week was at an average price of $1.33 each, according to Bloomberg calculations based on the SEC filing.
While selling MF Global’s common stock, Cadian bought the firm’s 3.375% convertible senior notes on Thursday, purchasing debt with a face value of $2 million, according to the second filing. Cadian now holds $3 million of the senior notes, which mature in 2018.
Bannasch’s firm primarily invests in the technology, media and telecommunications industries, according to the October investor presentation, though it also bets on related industries, including financial technology and services. Prior to forming Cadian, Bannasch managed a $2 billion portfolio of technology, media and telecom stocks and also completed more than $800 million of private investments and acquisitions at Cisco Systems Inc. (CSCO)
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