Tag Archives: Markets coverage
by Chris Roush
Mark Melin of ValueWalk reports about how money manager David Einhorn of Greenlight Capital is threatening legal action against Seeking Alpha because one of its writers posted private information about one of Einhorn’s investments.
Melin writes, “In the court documents published by ValueWalk, Einhorn claims that publishing the hedge fund’s holdings of Micron securities during the fourth quarter of 2013 cost the fund because it ultimately drove up the price of shares. On Nov. 14, seeking to keep its holdings confidential, Greenlight had requested confidential treatment from the Securities and Exchange Commission. When the information was published by Seeking Alpha, Greenlight alleges in its suit that it could have only come from a person who had confidential access to the fund. The disclosure on Seeking Alpha, filed by a person under the pen name ‘Valuable Insights,’ had a stake in Micron and financially benefited from the rise in the stock’s value. Micron’s stock price moved higher after the post, from $18.92 on Nov. 13 to $19.46 on Nov. 15. Einhorn ultimately disclosed his position in Micron on Nov. 21 at an investment conference in New York.
“For its part, Seeking Alpha has declined to identify the poster, but the profile on the web site says Valuable Insights is a ‘fund manager with more than 20 years of experience in the securities industry.’
“Media watchers say the case could be interesting as it approaches freedom of the press territory. The key question going forward is: will Seeking Alpha protect its source, in this case a member of the web site who disclosed confidential information, or will Einhorn prevail?”
Read more here.
by Chris Roush
Michael Casey, a senior columnist for The Wall Street Journal, writes for the Committee to Protect Journalists about the need for business journalists to do a better job of explaining complex financial topics to readers.
Casey writes, “To be fair, those on the losing side of Wall Street’s profit-driven pre-crisis trade mostly failed to exploit new opportunities to expose the risks associated with it. In this era of ‘big data,’ where high-tech analytical techniques can produce abundant, quantifiable information, we should all have been empowered to uncover the truth. But in reality, for the average investor, journalist, or even regulator, this new trove of data has been mostly out of reach and unintelligible.
“It should now be the duty of journalists to unlock it. And to do so, they need to harness the same tools that financial institutions and corporations use to sift, interpret and make sense of mass digital information. The value of human sources providing information on market players’ activities hasn’t gone away–think of the lasting impact of The Wall Street Journal‘s ‘London Whale’ scoop on JPMorgan Chase’s risky trading bets last year, a story that led to news that the bank had racked up $6 billion in losses and, later, $1 billion in regulatory fines. But those stories must now be complemented with computer-enhanced analysis and interpretation. To get at the truth will require crunching the numbers–billions of them.
“‘The question is: How do you take the proliferation of data and extract something intelligent out of it?’ said the Pew Center’s Murray. ‘I think data analysis is going to become a much more important part of journalism.’
“If journalists are to investigate and interpret the complex systems of data management with which financial institutions create information monopolies, they need resources. Yet in the developed countries in which these complex new financial markets are thriving, the dominant trend in the penny-pinching media industry is for cutbacks, not investment, as traditional news outlets adjust to a highly competitive environment for online advertising.”
Read more here.
by Chris Roush
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This role requires experience conducting stock market research and an understanding of various techniques and tools professional investors use to make buying and selling decisions.
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by Chris Roush
Two articles touting Galena Biopharma were removed from the Seeking Alpha website Monday because they were written by the same person using different aliases, reports Adam Feuerstein of TheStreet.com
Feuerstein writes, “This is the second time Seeking Alpha has been forced to take action against individuals using multiple aliases to tout Galena, a small drug developer with a breast cancer vaccine in a phase III study. In January 2013, the investor Web site removed five articles promoting Galena written by the same individual under three different pseudonyms.
“The most recent incident is more serious and potentially damaging because of evidence linking Galena to a stock-promotions firm which wrote and published the articles on Seeking Alpha. The articles were part of a broader, coordinated ‘brand awareness campaign’ designed to boost Galena’s stock price, according to a document obtained by TheStreet.
“Aided by this promotional campaign, Galena shares tripled in value from this summer. Coincidence or not, Galena insiders have made millions of dollars by selling company stock in January.
“Galena did not respond to phone calls and emails seeking comment.”
Read more here.
by Chris Roush
David Dayen of The American Prospect reviews Dean Starkman‘s book “The Watchdog that Didn’t Bark” about business news coverage during the financial crisis and wonders whether online journalists acted as watchdogs when the mainstream media didn’t.
Dayen writes, “It’s for this reason that Starkman disappoints when talking about online journalism. While he praises blogs like Naked Capitalism and the reporting at places like the Huffington Post, he believes such outlets have not filled the gap created by mass layoffs at the major dailies. In fact, Starkman mostly views digital media as a tool for corporate raiders to downsize traditional outlets, and he does not believe the business models of independent digital media support investigative journalism.
“This ignores a fairly rich body of work, including reporting on the financial crisis and its aftermath, that came directly from the online world. For example, those individuals who broke the story of foreclosure fraud—the mass use of forged and fabricated documents to rush homeowners through the eviction process—did not work at traditional media outlets but were foreclosure victims, who uncovered discrepancies with their own documents and started their own websites, like Foreclosure Hamlet and 4closurefraud.org, to get the word out when the media wouldn’t return their calls. In another era, these people would be either investigative sources or invisible, depending on the discretion of the media, but Internet publishing tools allowed them to tell their story anyway.
“While the Internet ‘presents severe structural barriers to accountability reporting,’ as Starkman writes, it also presents potential breakthroughs. Instead of long-form journalism that bundles months of reporting into one shot, there’s value in incremental, iterative reporting that releases each detail as it’s gathered, breaks down complex material into digestible chunks and furthers the narrative for months, even years. This is the tradition I come out of, and I think it does an able job, even if it’s not the Great Story, which Starkman holds up as the epitome of investigative journalism. There’s nothing inherent in word count that confers superiority.
“If we want to know what happened in the aftermath of a crash, the elites of the media universe can perform that task well. But if we’re going to catch the next instance of financial malfeasance in real time, the warning may come from someone sitting at their laptop. Starkman makes the argument that people rely on traditional media, and he’s right. But his entire book identifies the dangers of that reliance.”
Read more here.
by Chris Roush
Josh Brown, who writes The Reformed Broker blog, wonders whether the business news media is now too much on the lookout for a scandal.
Brown writes, “The premise is that with more middle class investors crowding into the stock markets during the 90′s and an explosion in demand for investing stories, the types of investigative journalism that might have stopped the credit bubble in its tracks simply disappeared. It’s an interesting point.
“It should be noted that non-investors probably can’t be bothered to consume business media regularly, in most cases, so of course the tendency to cater to those who will read you is going to be hard to fight.
“The other counterpoint you could make is that, in the wake of the crash, the media pendulum has probably swung all the way in the other direction. From 2010 on, it’s begun to seem as though EVERYONE wants to talk systemic risk, bubbles, the malfeasance of the banks, etc. The press’s default setting is now “Scandal!” and on Twitter – the financial media’s faculty lounge – we do a public hanging roughly once a week these days the moment there’s even a hint of impropriety alleged.
“There’s even been quite a bit of Zero Hedge emulation in the mainstream press and some of the top financial journalists of the current era are closeted Marxists. There are also, it seems, more outlets for reporters to write at than ever, most of which are simply dying for a juicy story about some potential market scam or shock to the financial system.
“So maybe the problem Starkman describes is, to some extent, already correcting itself.”
Read more here.
by Liz Hester
Many on Wall Street have been watching the trial of Matthew Martoma closely. The SAC Capital Advisors trader is looking at 10 years in prison for his conviction on insider trading charges, but most are still waiting to see what will happen to Steven Cohen, his boss.
The Wall Street Journal had this story by Christopher M. Matthews and John Carreyrou:
A jury found Mathew Martoma guilty of insider trading Thursday, handing prosecutors their eighth win against someone who worked at SAC Capital Advisors LP and possibly bolstering a related case against firm founder Steven A. Cohen.
Prosecutors have long pursued Mr. Cohen, who built one of the country’s most successful hedge funds over the past two decades and managed more than $15 billion at the firm’s peak. He has denied involvement in any wrongdoing and hasn’t been charged criminally, but he faces a civil allegation by the Securities and Exchange Commission that he failed to adequately supervise two senior employees at his firm.
Both of those men, Mr. Martoma and Michael Steinberg, have now been convicted on criminal charges. Mr. Martoma, 39 years old, was found guilty Thursday of taking part in what prosecutors say was one of the largest insider-trading schemes ever—illegal trades on two pharmaceutical companies that helped SAC and its traders book profits and avoid losses worth a total of $275 million.
Those dual convictions could hurt Mr. Cohen’s defense. The trades at the heart of Mr. Martoma’s case, for instance, are some of the same ones the SEC cites in its lawsuit against Mr. Cohen.
Alexandra Stevenson and Matthew Goldstein wrote for The New York Times that Cohen continues to conduct business despite the trials of his employees:
For Mr. Cohen, meanwhile, it is business as usual, albeit on a somewhat reduced scale. He is moving ahead with plans to convert his 22-year-old firm into a family office that will manage no outside money, just his $9 billion in personal wealth. The firm will still employ more than 800 people and maintain offices in several cities. At one point during Mr. Martoma’s trial, Mr. Cohen, a noted art collector, attended a New York Knicks basketball game at Madison Square Garden with the art dealer Larry Gagosian.
The case against Mr. Martoma was notable because it was the first time that Mr. Cohen was linked to questionable trades at his firm. The two men had a 20-minute phone conversation on July 20, 2008, the day before SAC began selling two drug stocks. For more than two years, federal prosecutors and agents with the Federal Bureau of Investigation pressed Mr. Martoma to cooperate and tell them what he and Mr. Cohen had discussed.
But with the conviction of Mr. Martoma, an investigation that lasted almost a decade of Mr. Cohen, 57, and his Stamford, Conn., hedge fund may have seen its last criminal prosecution.
When SAC was indicted last summer, federal prosecutors called the onetime $14 billion firm a breeding ground for inside trading activity and a “veritable magnet for market cheaters.” And federal authorities have said they are continuing to investigate accusations of insider trading in several other stocks SAC traded
Reporting on the trial for Reuters, Nate Raymod wrote that Martoma gave little reaction to the verdict:
Martoma gave no apparent reaction as the verdict was read. His wife, Rosemary, sat up in her seat in court as the verdict was read, with tears going down her face. They exited the court holding hands.
As news photographers snapped pictures, Martoma walked stone-faced out of the courthouse and into a waiting SUV with his wife and defense team. They did not speak to reporters.
“We are very disappointed and we plan to appeal,” Richard Strassberg, Martoma’s lawyer, said through a spokesman.
U.S. District Judge Paul Gardephe did not immediately set a sentencing date. Martoma, 39, could face a maximum 45 years in prison, although the highest sentence to date in an insider trading case is 12 years.
But Businessweek’s Sheelah Kolhatka raised several good points about why Martoma didn’t testify against SAC:
But after four weeks of trial, the testimony of two Alzheimer’s doctors and that of drug company executives, traders, compliance officers and academics, two days of jury deliberations, and now a unanimous verdict, a huge unanswered question lingers: Why didn’t Mathew Martoma flip?
Martoma was charged in November 2012 with insider trading in two drug stocks, Elan (PRGO) and Wyeth (PFE), in what the government described as the largest insider trading case in history, with $275 million in profits and avoided losses. Some of the trades at the heart of the case involved Martoma’s former boss, SAC founder Steven Cohen, who, the government alleged, sold off SAC’s position after a 20-minute phone conversation with Martoma that took place on July 20, 2008. No one knows what took place during that phone call, and it’s possible that no one ever will. Cohen himself has not been charged criminally. SAC Capital pled guilty to securities fraud in November. The U.S. Securities and Exchange Commission filed a civil charge against Cohen for failing to supervise his employees that has yet to be resolved.
Government investigators never expected the Martoma case to go to trial. The evidence against him was believed to be so strong, and the potential punishment so steep—up to 20 years in prison—that most observers believed Martoma, father of three young children, would do the rational thing and agree to cooperate in exchange for a reduced sentence. For whatever reason, he didn’t.
For Cohen, long known to be the true target of the government’s investigation, the verdict comes as both a further blow and a relief. Prosecutors managed to shut down his hedge fund, but he has so far avoided time behind bars. It’s Martoma who now awaits sentencing, while Cohen contemplates his future as the head of a multibillion dollar family office and a buyer of high priced art.
And isn’t that really the true injustice? The founder, head and culture-maker of the firm continues to avoid punishment, while those around him continue to fall.
by Chris Roush
Shaban writes, “Business reporters are supposed to make the complex worlds of finance and commerce intelligible to non-experts. But business journalism generally failed to predict the looming credit collapse, although a few reporters warned of its arrival. Critical stories by Michael Hudson, of the Roanoke Times and the Wall Street Journal, and Gillian Tett, of the Financial Times, drowned in a vat of glimmering C.E.O. profiles and analyst chatter. Business reporters missed opportunities to investigate abusive lending, negligent rating agencies, and dodgy derivatives trading. To critics, they were complicit in the financial crisis and the recession that followed.
One of these critics, Dean Starkman, is the author of a new book, ‘The Watchdog That Didn’t Bark.’ In his history of business news, Starkman describes how reporters, dependent on insider sources to inform an élite audience of investors, practice a kind of journalism that is defined by access. News becomes a guide to investing, more concerned with explaining business strategies to consumers than with examining broader political or social issues to the public. Access reporting is friendly to executives because it relies on their candor. Starkman writes that during the crucial lead-up to the financial crisis, from 2004 to 2006, this news culture crowded out the kind of investigative journalism that might have inspired reform. Andrew Ross Sorkin’s ‘Too Big to Fail,’ a book that paints culpable Wall Street kingpins as weary heroes, is, to Starkman, the definitive account of the crash—and wrongly so.
“Starkman tells his story partly by reaching back into the past. In 1904, Ida Tarbell penned ‘The History of the Standard Oil Company,’ a damning critique of the oil monopoly and its baron, John D. Rockefeller, and pioneered what Starkman calls ‘accountability journalism.’ But, even then, business journalism still functioned mainly as a messaging service between merchants and financiers. Starkman sketches the origins of the Wall Street Journal (founded in 1889) and Forbes (1917). In the early years of these publications, reporters who were cozy with board members were rewarded with scoops about acquisitions and other little-known developments.”
Read more here.
by Chris Roush
Josh Friedlander is editor of Absolute Return, which covers the hedge fund industry. He previously served as online editor of AR Magazine, and research editor and senior writer of Absolute Return.
He joined HedgeFund Intelligence in 2005 from Investment Dealers’ Digest, a weekly magazine covering Wall Street, and had previously reported on Wall Street and the pension industry for Institutional Investor News.
Friedlander sits on the board of governors of the New York Financial Writers’ Association, the nation’s oldest organization devoted to business and financial journalism, where he served as president in 2009.
He holds a Bachelor of Arts degree in History from Connecticut College. In 2007, he was selected as one of the ‘30 under 30’ most promising young business journalists by Newsbios.com.
Friedlander recently spoke by email with Talking Biz News about Absolute Return and how it covers the hedge fund world. What follows is an edited transcript.
How was Absolute Return started back in 2003?
Absolute Return was the latest in a series of hedge fund publications launched by our parent company, HedgeFund Intelligence. HFI began with the launch of EuroHedge in 1998 and then expanded to AsiaHedge in 2000, InvestHedge (which covers allocators to hedge funds) in 2001, and then Absolute Return. Around the time of the Absolute Return release, Euromoney Institutional Investor bought HFI.
The founder of HFI, Iain Jenkins, had been the investment editor of Sunday Business and a European business correspondent for the Sunday Times. In forming HFI, he was both lucky and good. He started the business right after the fall of Long Term Capital Management, and one could hardly have expected hedge funds to increase in institutional credibility, but it was in retrospect the start of the modern era for hedge funds. Assets that numbered in the hundreds of millions of dollars exploded to more than $2.5 trillion within a decade.
Why was there a need for a publication devoted to covering the hedge fund business?
There was a definite void in the amount of information available to hedge fund industry participants. The industry’s growth was evident within financial circles, as hedge funds expanded from a niche group of money managers serving the ultra-wealthy, to firms that increasingly reflected the needs of institutional investors. At the end of 2002, the top 100 firms managed $310 billion in the U.S. amid little press coverage or familiarity.
What coverage there was centered on a small number of hedge fund superstars: Bruce Kovner, Dan Benton, Ken Griffin, Louis Bacon, Paul Tudor Jones, and George Soros were among the top U.S. managers at the time, and many were famous even outside of financial circles. In 2003, The New York Times, which then referred to hedge funds as “lightly regulated investments for the very affluent,” was busy discussing an emerging trend of “coming-out parties” connecting hedge funds and investors—what are now commonly known as “cap intro” events. Most of the mainstream press maintained an anthropological outsider’s voice and view when writing about hedge funds. Some still do, even though hedge funds are now enmeshed in financial markets.
It’s clear in hindsight that there was a need at the time for journalism that targeted the industry consistently with insight and that paid attention to even its mundane machinations, not merely the largest headline-grabbing personalities, profits and losses.
What are some of the difficulties in covering hedge funds?
They remain, for the most part, private businesses. Their performance is not typically available to the public, most of their investors remain private, and they often have little interest in talking to the press, regardless of whether they have done well or poorly. There are clearly a number of hedge fund managers, most notably activist investors, who deliberately use the media as a tool, but most firms do not actively seek press attention, or welcome it.
by Chris Roush
Editor’s note: We asked David Jackson, the founder and CEO of SeekingAlpha.com, to respond to a post last month from our PR curmudgeon Frankie Flack. Here is his response.
Investor relations and corporate public relations used to be straightforward, because companies could largely manage their own news coverage.
The recipe: (1) build relationships with analysts and the journalists who cover your industry, (2) issue frequent press releases, (3) alert the journalists and analysts to the latest press releases, (4) call them to add color and extra detail, (5) if the journalists and analysts are hostile or sloppy, educate them or cut them off from the information flow.
Seeking Alpha has changed that. Seeking Alpha is the dominant platform for crowd-sourced equity research, with more investors reading articles about stocks in real-time than any other website or platform, and more contributors than there are sell-side analysts. Because Seeking Alpha’s contributors are opportunity-driven investors, any of them could take an interest in your stock and write about it. And even if an article about your stock is positive, you can’t control what comments Seeking Alpha’s readers will write in response to it.
So if you’re the CEO or investor relations officer of a publicly traded company, it’s now harder to control the coverage of your company.
But if you’re an investor, Seeking Alpha is great news, for three reasons:
First, Seeking Alpha provides coverage of stocks that nobody else covers. Seeking Alpha covers about 2,000 small caps each quarter, about 750 of which have little or no sell-side coverage. Sell-side analysts and journalists have never done a great job at covering small cap companies, because their business model doesn’t support it. In contrast, Seeking Alpha’s investor-contributors love to find profit opportunities where there’s less coverage.
Second, Seeking Alpha articles have proven predictive value. A December 2013 study by a group of academics found that Seeking Alpha articles predict future stock returns and earnings surprises over all time frames studied: one month, three months, six months, one year and three years. Seeking Alpha articles predict stock returns even excluding the initial impact. (Our Top Ideas, for example, move their stocks by an average of 2.9 percent in the first 24 hours.) And the predictive value rises with longer time frames, so Seeking Alpha is for investors, not day traders. Overall, Seeking Alpha articles have higher predictive value than sell-side research and stories from newswires.
Third, Seeking Alpha’s community is highly intelligent. Active debate and even disagreement cause more information to come to light. The study’s findings in this area were remarkable: The Seeking Alpha comment community serves as a self-policing safety net. Comments on Seeking Alpha have strong predictive value. Contributors whose articles generate acrimonious comments underperform the market. And when comments conflict with articles, the comments have higher predictive value. (This is in contrast to stock message boards and stock tweets, which academic studies have found to have no predictive value.
Serious investors recognize the importance of Seeking Alpha, and are making it part of their investment process. Our SA PRO product (which is too expensive to disclose pricing here) gives investment professionals research access to the full library of Seeking Alpha articles and a one day early look at our Top Ideas and small cap coverage. A rapidly growing number of portfolio managers and analysts at hedge funds and mutual funds are signing up
PR and IR people will eventually embrace this reality. They’ll learn to participate in discussions of their stock while not violating RegFD. They’ll learn to build relationships with the Seeking Alpha contributors who write about their stock and the stocks in their industry, just as they built relationships in the past with sell-side analysts and business journalists. And they’ll understand that Seeking Alpha’s crowd-sourcing with strong editorial controls is the future of equity research.