Levine on Wall Street: It's Not Insider Trading If No One Listens to You

A Pershing Square analyst has had enough fun in activist investing. A Hong Kong brokerage has a discount IPO package that doesn't include due diligence. And the SEC ___________.

SAC's lawyer tells a court that SAC wasn't insider trading .

As far as I can tell Mathew Martoma's insider trading defense is that, sure, he might have gotten inside information from a lot of doctors, but he never traded on it. You see, he was just an analyst at a hedge fund making trade recommendations, possibly based on inside information. But the actual trades were done by the hedge fund -- mostly at the order of its boss, Steve Cohen -- and Cohen's decision-making had nothing to do with Martoma. Martoma was just decoration; Cohen was relying on other, legal information. I don't know what to tell you about this theory as a legal theory, but SAC is happy to corroborate it. Yesterday SAC general counsel Peter Nussbaum testified for the defense:

Mr. Nussbaum told the jury that Mr. Cohen had a special contract with Wayne Holman, a SAC portfolio manager who left the firm in 2006 to set up his own hedge fund, to provide trading advice to Mr. Cohen about Wyeth.

Presumably Holman wasn't getting inside information though I guess that's not necessary to Martoma's defense.

Shane Dineen has a new job .

Or at least, some free time to pursue "areas of his own interest outside of activist investing." Dineen was the analyst at Bill Ackman's Pershing Square Capital Management who largely authored, and presented, Pershing's short thesis on Herbalife, which you may have heard about. That thesis has not worked out great so far, and there has been some speculation about why Dineen left, but here's a pretty robust investor letter from Ackman praising Dineen, saying that he left voluntarily and over Ackman's efforts to keep him and that there'll be a seat open if he ever wants to return to Pershing, and ending, Carthago delenda est style, like so:

With respect to Herbalife, we remain convinced that the Company has operated an illegal pyramid scheme since its founding. We are encouraged by the recent regulatory developments concerning the Company.

That last bit may reference, among other things, a new Canadian inquiry into Herbalife.

Companies don't like activists .

Here's a good roundup of how companies have improved their anti-activist defenses: More than half of 2013 poison pills are triggered at a 10 percent threshold, versus fewer than 1 in 12 in 2005; 59 percent of 2013 pills count swaps as ownership, versus 4 percent in 2008; and 30 percent of acquisitions in the second half of 2013 were by tender offer (faster and less prone to meddling than a merger), versus 9.6 percent in 2006. One activist pretends to be shocked:

"The notion that activists are the enemy, or that companies have to put up walls, is illogical," said Greg Taxin, managing director of Clinton Group, an activist fund with about $1.5 billion in assets. "I'm an owner of these businesses, and I'm trying to make them more successful in a way that benefits everybody."

But not all poison pills are for activists .

Steven Davidoff points out that J.C. Penney's pill, with an especially tight 4.9 percent trigger, probably isn't designed to deter activists. It's designed to preserve net operating losses that would be lost on a change in control, and since the tax code defines a change in control in a particularly silly way, the NOL pill looks pretty silly. But is relatively standard and blessed by the courts.

Where can you spend your Bitcoin points ?

Here is an argument that credit card processing is no more expensive than Bitcoin processing (related), and that the credit card fees mostly pay for the cards' short-term credit, fraud protection, and rewards programs. None of which Bitcoin particularly offers.

You gotta pay extra for due diligence .

Here is a story about an investment bank in Hong Kong that underwrote an initial public offering for a fee of HKD 1.5 million, or around $200,000. Unfortunately regulators found that the underwriter "didn't conduct reasonable due diligence, failing to check a remarkable discrepancy in financial statements, or keep proper records in relation to its sponsor work." Its defense, amazingly, was that that fee "didn't merit the 'same level of minute due diligence' as bigger deals." You see, you only get the basic IPO package for $200,000, which doesn't come with due diligence. Due diligence is an optional item at an extra cost.

The SEC leans hard on the black highlighter .

Here ____________ that ______________ and _______________. ___________ is __________ ____________ although one person _____ _______________. A lawyer __________: "____________ __________ ________________ by ________________." After reading this ___________, you'll _______________.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    (Matt Levine writes about Wall Street and the financial world for Bloomberg View.)

    To contact the author on this story:
    Matthew S Levine at mlevine51@bloomberg.net

    To contact the editor on this story:
    Toby Harshaw at tharshaw@bloomberg.net

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