Dan McCrumRead Biography
“Oh, didn’t you see it? I put it right on your desk, just inside the timeshare brochure, under that pile of papers.” Keurig Green Mountain Coffee Roasters, manufacturer of single serve coffee pods, published quarterly results on Monday by filing form 10-Q in the normal manner. Breaking with tradition, however, there was no announcement or press release. Who cares, you might ask, as Bart Becht’s JAB Capital and friends have agreed to buy the group in December. Which is probably the reason, not the 9 per cent drop in sales compared to the same period the year before.
A competition: describe in 20 words or less Hexagon AB, the Swedish listed technology group run by Ola Rollén, which has a market capitalisation of €11bn. To help, here’s what the start of the 2014 annual report has to say (or click on the image for the whole thing). MISSION: Hexagon is dedicated to delivering actionable information through information technologies that enable customers to shape smart change across diverse business and industry landscapes.
Steven Cohen is a changed man according to the description given by Doug Haynes, president of Point72 — the thousand-person operation dedicated to growing the billionaire art collector’s fortune. The Mr Cohen of old was a snarling and aggressive trader who dominated the giant trading floor at the heart of SAC Capital, his Connecticut hedge fund renowned for its unmatched investment performance and fees. His dedication to the desk was stuff of Wall Street legend, at one point causing him to be late to the birth of a child. His was the trading book which mattered, pouring money behind underlings’ bets as the mood took him, the centre through which good ideas must flow. Now though Mr Cohen will regularly take time out of the trading day just to mentor young staff, part of the apprenticeship culture at the firm, according to Mr Haynes: He meets with a portfolio manager and their team three or four days a week usually for breakfast, usually for an hour, an hour and a half, purely to to provide coaching. It’s not an evaluation, its not a review, he just digs in and shares his experience. He probably does that on ad hoc basis two or three times a day, through the course of the day.
Farewell then, David Bowie. A great musician, artist and (this is a compliment) financial opportunist. In 1997 he hit upon a wheeze, he would sell the rights to future royalties from his extensive body of work. Securitisation — effectively a loan backed by the future payments — was in its innovation stage, a more innocent time before finance moved onto mass destruction world tours. Bowie’s was actually the first in a line of “Pullman Bonds”, developed by David Pullman. David Bowie was thinking of selling his masters
BoA Merrill Lynch’s Thundering Word suggests you may want to be long cash and volatility at the moment (in case the thought had not yet occurred).* They do also have some other recommendations, defensive growth in the US and yield in Europe and Japan among them. But it’s the chart which catches the eye. Recession risks remain mispriced: profits highly correlated with [Purchasing Managers Indices] and in both US & China PMI’s weak; upward momentum desperately needed to prevent global EPS downgrades (2016 forecast: 9.9%; latest:-5.8%). Note ISM <45 level has coincided with US recession 11/13 times since WW2 (Chart 1).
Slater & Gordon, the highly indebted Australian listed legal group, announced on Thursday it had withdrawn previously issued guidance for the current financial year, which ends in June. The market was a bit surprised by this, as guidance was affirmed on November 30, and the shares dropped 17 per cent to 89 Australian cents. The company’s stock is now worth A$300m, less than half the value of its outstanding debt, and quite a lot less than the A$1.3bn it paid for most of UK peer Quindell in May. What changed in the last two weeks? A new finance director, independent director and auditor have all come aboard recently, and the two men have decided on a review of the group’s financial forecasting.
A belated welcome back to Plus500, the UK-listed but Israel based contract for difference provider which currently deal with clients through Cyprus. It had planned to disappear into the the UK-listed but Isle of Man based Playtech, but that deal died last month. To celebrate we took a belated look at the financial results the company published for the first six months of this year. Revenues were actually higher than the same period in 2014, which is good going considering the company was forced to freeze all UK accounts pending proper implementation of anti-money launder procedures and other regulatory niggles. What surprises, however, was a big jump in the total for trade receivables not explained in the notes to the accounts.
Quindell was an assortment of legal businesses collected into a basket of troubles. In the year before almost all of the UK-listed group was sold to Slater & Gordon, an Australian rival, it made promises to stop burning cash by a series of deadlines, all broken. The A$1.2bn deal closed in May. Slater & Gordon said at its annual meeting on Friday the UK business wasn’t doing so well and the group as a whole will burn through A$30m to A$40m in the first half of its financial year. It still expects to make it up in the second half, however. Have we seen this script before?
Wirecard is the German-listed payment processor valued by the market at almost €6bn. It’s a market darling, a fast growing tech stock with a share price which has quadrupled in the last five years, raising €0.5bn from shareholders along the way. Much of the growth has come from Asia, where the group has bought up a string of local payments business. However J Capital Research, a US and Hong Kong registered independent research group, went looking for Wirecard in the region and reports finding thinly staffed offices, and in two places no office at all. The report, which is undermined in part by some faulty assumptions about Wirecard’s accounting, contrasts starkly with opinions from the 23 bank analysts covering the stock, of whom 17 are buyers and just one is a seller. The company has rubbished JCap’s work, saying it “fundamentally misunderstands the Wirecard business model”, while also disclosing it does not have a physical presence in some of the countries where it claims leading market positions in payment services.
Wirecard, the German listed payments company, is to pay as much as €330m for a business which was barely involved in payments two years ago, according to Indian corporate filings. Accounts for the largest subsidiary of the group to be acquired show qualified audit opinions due to concerns about revenue recognition and an inability to verify key financial totals, and recent resignations of directors and auditors. Sales and profits claimed by Wirecard for the businesses it intends to buy also imply a dramatic transformation in financial performance during the last 18 months. The question for shareholders, from whom Wirecard has raised €0.5bn in recent years to fund such dealmaking, is what exactly has it agreed to buy?
Valeant is getting plenty of attention due to its association with Pershing Square, one of its largest shareholders which also helped the pharmaceutical company try to buy Allergan last year. (Bill Ackman has full confidence in Valeant’s chief executive, Mike Pearson. Goldman Sachs… less so.) Thoughts have turned to Valeant’s cash flow once ties to Philidor, a controversial specialty pharmacy responsible for 6 per cent of sales in the first 9 months of this year, are severed. One sometimes-overlooked aspect to note: the circa $340m $290m* contribution to operating cash flow last year from that attempt on Allergan.
Did you know the London Stock Exchange likes to publish a list of “1,000 companies to inspire Britain”? The corporate equivalent of printing full results from an under 12′s swimming gala, so every mum buys a copy of the local paper, such inclusiveness brings with it a risk the inspiration is not what was hoped. For instance, Globo plc and Quindell, part of the inspirational set in 2013/14, may inspire Britain to take a harder look at how brokers on the LSE’s junior market, AIM, sell stock and oversee the companies doing so.
A surprise from Slater & Gordon on Tuesday: Wayne Brown, finance director of the Australian legal group since before it listed in 2007, is to step down without a replacement lined up. The company’s accounting is subject to an investigation by the local regulator, S&G restated accounts earlier this year due to what it said were basic spreadsheet errors, and managed to publish numbers which changed in several ways once the auditor had a look at them, so his departure is perhaps to be expected. The surprise is that the search for a replacement by Egon Zehnderhas only just begun — Mr Brown will remain in the meantime — suggesting this personnel change was not long planned.
Morning of Wednesday 21 October: we talk to Costis Papadimitrakopoulos about Globo’s apparent lack of customers, and allegations the company has fabricated sales. The Globo CEO and founder denies any wrongdoing. He puts us in touch with longstanding business associate Thanos Giamas, founder and CEO of Metis SA, to vouch for Globo. Following that conversation, according to Monday’s statement: The Chief Executive Officer, Mr Konstantinos Papadimitrakopoulos advised the Company on 25 October 2015 that up to 22 October 2015 he has: • sold 42,049,655 shares of Globo Plc; and • pledged 10,000,000 shares of Globo Plc under a personal loan agreement with Lantau Holdings Limited. The loan will default at close of business today because of two consecutive days of the suspension of the Company’s shares from trading.
Globo plc is a small technology company founded by a champion windsurfer in Greece 18 years ago and listed on Aim, London’s junior market, by reverse takeover in 2007. Since then it has raised more than €100m from sales of its stock and debt. It has some legacy businesses, and has made acquisitions, but its biggest business is now Go!Enterprise, software designed to create a secure bit of space for your employer’s data on your personal phone. However, according to a critical report published by Quintessential Capital Management, a small New York Hedge Fund run by Gabriele Grego, there appear to be problems with reported sales and profits. QCM tried to register an interest to buy the product with 40 different partners, resellers and distributors listed by Globo, without success. Globo “completely refutes all allegations made in this report”, and has requested a suspension to its stock so it can provide a more detailed response. In the meantime, the question for investors and auditor Grant Thornton is who really buys Globo’s product?
A trading update lands from Plus500, the Israeli contract for difference group. Let us draw your attention to a paragraph on its regulatory troubles, which resulted in the freezing of all UK accounts earlier this year. The Group continues to be the subject of regulatory scrutiny. However, throughout the period Plus500 has continued to work with, and provide any requested information to, the relevant regulators in the jurisdictions that it operates in but is currently not the subject of any restrictions on its business operations. No restrictions? This might surprise customers trying to sign up in the UK on Monday, who are told “Plus500UK Limited is currently unable to offer you a trading account.”
Slater & Gordon, the Australian legal group, delivered a fully audited set of results on Wednesday, the deadline to do so. Shares in the company — which have collapsed since it swallowed almost all of UK corporate train wreck Quindell — barely budged on the day, closing up 2 per cent. So what happened? We suspect the lack of market enthusiasm is related to how many of the numbers reported in August were different to those on which the auditors signed off this week. We’ll pick out a few below (and offer a quick reminder of why this all matters), but here is what may be the most important: somehow A$12.5m of underlying revenues and A$8.5m of underlying net profit fell out of the accounts in the last month.
A brief reminder of the Australian listing rules: companies must deliver an audited set of results within three months of their financial year end. For Slater & Gordon, the Australian listed law group digesting most of UK peer Quindell, that means Wednesday September 30, lest the shares be suspended come Thursday. We’ve mentioned before some of the issues likely to be discussed by the company and its auditors, in particular balance sheet values for accumulated work in progress and whether any of the A$1.1bn paid for Quindell in May should be written off. Lets think through the scenarios.
Forward guidance under Ben Bernanke and then Janet Yellen has been… changeable, notes David Kelly, chief strategist for JP Morgan Asset Management, who shares a reminder of the shifting timescale. Here’s the Federal Reserve on when it would be appropriate to raise the target range for the federal funds rate: January 2009 — not “for some time” March 2009 — not “for an extended period”
The biggest shopping event in the world? That would be “Singles Day”, an anti-Valentines festival of Chinese spending dominated by Alibaba, Jack Ma’s giant e-commerce company which also has a set of Cayman registered derivative contracts listed in New York under the same name. When Bronte Capital hedge fund manager John Hempton recently interviewed job candidates, he asked them to think through the implications of a company making 278m online transactions in one day. He has now blogged about it, which is worth reading for two reasons: as an example of the way investors think through their assumptions and information provided by a company and, perhaps more importantly, for the critique of numbers supporting a $157bn valuation of those New York listed derivatives.
If you’re thinking about stock fraud, you don’t want to do it in the US where the SEC has both prosecutorial power and a desire to exercise it. One other point to consider from the SEC’s latest prosecution: it is possible to pursue individual auditors for missing signs of fraud they should have caught, without destroying the audit firm in a repeat of the Arthur Andersen collapse. Washington D.C., Sept. 9, 2015 — The Securities and Exchange Commission today charged national audit firm BDO USA with dismissing red flags and issuing false and misleading unqualified audit opinions about the financial statements of staffing services company General Employment Enterprises.
Slater & Gordon, the Australian listed law group, on Friday released a complex set of accounts full of restatements, unusual accounting policies and changes to the way the figures are prepared and presented. The company under investigation by the Australian Securities and Investment Commission, but these are preliminary figures — and so not audited yet. Andrew Grech, managing director, signed a statement saying “The financial report is in the process of being audited and is not likely to be subject to audit dispute or qualification.” The accounting firm doing the work has not been named. Slater & Gordon recently purchased almost all of the scandal hit UK group Quindell for A$1.3bn. More details from the results below, but first some highlights: the Australian group has significantly more debt than expected, the numbers don’t match the pro forma set presented at the time of the acquisition, and in a month of operation the businesses acquired managed to lose A$5m.
Slater & Gordon, the Australian listed law group, will report full year results on Friday, the first since buying almost all of the UK listed basket case Quindell for A$1.2bn. Presentation of the figures had been set for the 24th, but was pushed back four days. The reason, Slater & Gordon told us, was “to provide our shareholders with the fullest update possible on our FY15 results and our FY16 outlook”. One risk here is that a full update will include the admission it bought a billion dollar basket case. We’ll consider that and other issues below, in search of an answer to the underlying question: why did Slater & Gordon get suckered by Quindell?
Wirecard, the German listed payments company, is what might be called a tug of war stock. On the one side are fans, who have long liked fast growth in sales and earnings and expect it to continue. On the other are critics and potential sellers, concerned about what appears to be an unexplained pile of assets on the company’s books. If there isn’t a good explanation for that pile, the risk is sales and profits — the basis for enthusiasm — were overstated. On Tuesday Wirecard will have the opportunity to resolve that debate when it publishes results, by doing what any company should be able to: explain its business in clear and simple terms.
Mr. Elon Musk, our Chief Executive Officer, Product Architect and Chairman of our Board of Directors, has indicated his preliminary interest in purchasing up to an aggregate of 83,974 shares of our common stock in this offering at the public offering price for an aggregate purchase price of approximately $20 million. Tesla Motors, the loss making manufacturer of electric cars, has announced plans to sell an additional 2.1m shares to its investors, to raise $0.5bn in cash.
Hoisted from the archives, a Nokia presentation from the Lehman Brothers Worldwide Wireless and Wireline Conference, May 29 2008. We were prompted to find it by a stock photo of the Economist (now sold). The February 2005 edition included the headline story “Nokia’s turnaround”, about what was then the world’s largest maker of handsets. Ho ho, we thought, until we looked at the share price.