Levine on Wall Street: Allergan Allegations

Carl Icahn took "sips from a martini passed to him while on camera" on CNBC, that is all you need to know this week, there is no other news.

Apple is becoming shareholder-friendly.

Is "an unusually large 7-for-1 stock split" exciting news? Ehhh. Also "Apple expanded its buyback program to $90 billion from $60 billion because it views its shares as undervalued"; I mean, soon they'll be trading under $100 a share, how can you not buy more? Anyway I'll just assume the extra money is, like, in lieu of any future product launches.

Allergan: Okay, or not okay?

If you're interested in the legality of the Valeant-Pershing Square bid for Allergan, I highly recommend this Ronald Barusch Dealpolitik column:

Valeant and Pershing Square address this regulatory issue in several ways. First, in their contract, both “acknowledge that no steps have been taken towards a tender or exchange offer.” In another provision, if Valeant makes a tender or exchange offer, Valeant is required to identify Pershing Square and the entity they form as “co-bidders,” presumably to rely on the principle that bidders can trade on the basis of undisclosed intentions.

Likely to support this position, Pershing Square has agreed to buy $400 million of Valeant stock (at a 15% discount) immediately prior to a business combination with Allergan if Valeant so elects. A small amount in a deal of over $40 billion, but buying stock in the bidder is one of the hallmarks of what co-bidders look like.

Elsewhere, my Bloomberg View colleague Bill Cohan gets angry in DealBook, using the word "windfall" and claiming that the Allergan shareholders who willingly sold to Ackman were "duped," neither of which I particularly agree with.

Have I said before how great Carl Icahn is?

Much of what he said on CNBC Tuesday night -- that, whatever his personal feelings for Bill Ackman, the Allergan toehold is perfectly legitimate; that claims that activist investors have only short-term interests tend to be made without evidence -- is right on. But the fact that he said it "shortly after taking sips from a martini passed to him while on camera" is what makes him Carl Icahn. Meanwhile, here is a gratuitous dig at his physical appearance, along with a discussion of his plan to seed "an army of mini-Icahns" which, good lord am I looking forward to that.

Quis custodiet ipsos private placement due diligence agents?

I mean, obviously don't buy stock issued by private companies through brokers who can't afford to do due diligence and rely on outside due diligence agents paid by the issuer. "I've never heard of this company, but a broker I've also never heard of tells me it's rock solid," come on. There are some overstatements here about the conflict of interest:

Companies that raise money through private placements, such as Provident, are paying due diligence firms to review their deals so that broker-dealers will sell them. "They have to write these reports in such a manner that it's gotta be acceptable" to the issuer, said Michael Miller, a due diligence officer at Sigma Financial, a broker-dealer in Ann Arbor, Michigan.

That is precisely as true of big underwriters doing public offerings: The underwriters need to conclude their due diligence satisfactorily to conduct the public offering and get paid. So public offering due diligence is conflicted too. But public underwriters have reputational, etc., constraints. Some Guy Due Diligence LLC can just write whatever the issuer wants it to, collect a check, and vanish.

Ratings agencies are back.

Speaking of reputational constraints, "Riding a global bond boom, the two biggest U.S. firms, Standard & Poor's Ratings Services and Moody's Investors Service, this month are expected to post record first-quarter profits." And that's with, you know, rather less structured credit issuance:

But the firms also have expanded further into other products besides basic ratings. Most notably, they are selling their proprietary analysis, the research and market data that shape ratings, for additional fees. These new analytics businesses are highly profitable because they mostly bundle research that has been compiled already.

Bad Buffett Benchmarking.

Cullen Roche is unimpressed by Warren Buffett's (failing) efforts to find a bearish investor to come to the Berkshire Hathaway annual meeting and explain why Berkshire's a bad investment:

Buffett shouldn’t be asking for someone to explain why his firm will do poorly in the future. He should be asking for someone to come in and explain why anyone should own Berkshire Hathaway relative to a highly correlated index like the S&P 500. In this manner, owning a long only alternative is similar to being bearish on Berkshire in that you believe the highly correlated index will outperform his firm.

Things happen.

Neo-Fisherites. Barclays will have a "significant year-on-year reduction in FICC income," just like everyone else. Try some Litecoin. Former White House chief of staff chose joining a Swiss hedge fund over being governor of Illinois. The biggest-ever high-yield bond deal, by Numericable, traded well. Yogurt company seeks cash; "live-streamed spinning classes in the home" company gets cash. Felix Salmon has transcended text.

"Fake FX Trader Spent Client Cash at Casinos, Clubs, FCA Says."

Of course he did. Just once I'd like to read about a fake FX trader who spent client cash pursuing his passion for 18th century furniture.

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

    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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