-4.2% vs last trade before numbers
Mario Gabelli on Monday gained the upper hand in his battle to force Carl Icahn to sweeten his offer for a car-parts manufacturer.
Icahn, who owns 82 percent of Federal-Mogul, offered $9.25 a share for the remaining stake but fell way short after Gamco Investors boss Gabelli — who has a leading stake in Federal-Mogul — pressed for a higher price.
Just 28 percent of the remaining shareholders tendered their shares at Icahn’s offering price.
Icahn needs to win a majority of the outstanding shareholders. Once the activist investor’s stake passes 90 percent, he can take the company private.
On Monday, Icahn extended his tender offer for 15 days, until Nov. 14. Icahn can still win the day over Gabelli without raising his price.
There was little urgency for shareholders to tender at the present price, because Icahn’s merger agreement with Federal-Mogul required him to extend his $9.25 offer at least one time.
However, some believe he will improve the tender offer to get the deal done.
“It wouldn’t surprise me if Icahn raises his bid by $1 a share” before the new deadline, a source closely following the situation said.
Icahn has already raised his bid twice — first from $7 and then from $8.
Gabelli, reached at an auto-parts conference in Las Vegas, declined comment — as did Icahn.
This isn’t the first time the two have tangled over price.
Last year, Gabelli succeeded in getting Icahn into a bidding war against tire maker Bridgestone for auto-parts company Pep Boys.
Bridgestone had bid $15 a share, but after a protracted bidding war, Icahn paid 23 percent more, or $18.50, a share.
Gabelli owned a leading Pep Boys stake, just as he holds 36 percent of the non-Icahn owned slice of Federal-Mogul.
Part of why Icahn and others are having trouble getting asset managers to sell shares in tender offers is they are getting stingier with their proposals, the source said.
“People are trying to pay as little as possible,” the sources added. “They are being very careful.”
Federal-Mogul shares stayed flat Monday, closing at $9.26.
‘High-up’ Alibaba staffer helping SEC probe into tech giant
The Securities and Exchange Commission is working with one or more whistleblowers as it investigates the controversial accounting practices of the China-based e-commerce giant, The Post has learned.
Alibaba disclosed in May that the SEC was looking into how it accounts for a tangle of complex transactions between its Cainiao logistics arm and dozens of other business affiliates, as well as the way it reports sales for its annual Single’s Day shopping bash.
One mole was identified as a “high-up” official at Alibaba “who helped initiate the investigation” earlier this year, according to a source close to the situation.
It couldn’t immediately be learned whether that official is still working at Alibaba, which is headed by billionaire Jack Ma, but the insider is now “assisting the SEC in the hopes of a reward,” the source said.
SEC probers “may be using other whistleblowers” in addition to one who’s confirmed, the source added, noting that the investigation “will probably take another several months.”
One or more whistleblowers could lend the SEC a crucial hand as it scrutinizes NYSE-listed Alibaba’s operations in China, much of which have been shielded from the US spotlight by local authorities.
“There are laws within China on what [Alibaba] can turn over or not turn over, and that could support the company being nonresponsive” to the SEC, says Donn Vickrey of Pacific Square Research, a firm that has raised questions about Alibaba’s accounting.
“But if there’s a whistleblower, it raises the possibility they have someone who could provide those documents,” said Vickrey, adding that he had no knowledge of the federal probe’s progress.
An SEC spokesman declined to comment on Monday. Alibaba spokesman Bob Christie declined to comment about the reported whistleblower and said the company is fully cooperating with the SEC.
Last month, Alibaba said sales from this year’s Single’s Day festival, slated for next week with headliner Katy Perry, are expected to top last year’s, when the company said they surged 60 percent to $14.3 billion.
Short-sellers have questioned such eye-popping numbers, charging that they could be inflated by fake transactions or sales from canceled orders.
The source close to the investigation, who wasn’t affiliated with a short-seller, said the whistleblower “is contending billions in accounting irregularities” at Alibaba — an allegation that couldn’t be confirmed.
Further details couldn’t immediately be learned, but Alibaba skeptics including short-seller Jim Chanos have particularly questioned whether the Cainiao logistics arm is being used to hide losses on Alibaba’s balance sheet.
Info on the individual warehouses and shipping companies used by Cainiao is scarce, so “you don’t see the entire operation of Alibaba,” Chanos griped in an interview with CNBC last week.
Early premarket gappers
Gapping up: OCLS +60.5%, DRYS +25.8%, DRRX +16.1%, RYAM +10.6%, CGNX+7.9%, AMKR +5.6%, RDS.A +3.9%, AEIS +3.7%, LMNX +3.3%, COH +3.1%, CIE+2.8%, VRX +2.7%, VLO +2.7%, ORC +2.6%, ADM +2.5%, OSK +2.5%, LION +2.4%,BBL +2.4%, CS +2.2%, IDTI +2.1%, DLNG +2%, AA +2%, FCX +1.8%, BHP +1.7%,RIO +1.7%, SLV +1.7%, AUDC +1.7%, BBRY +1.6%, SLW +1.6%, ABX +1.6%, GDX+1.5%, EMR +1.5%, GG +1.3%, RBS +1.3%, CPS +1.3%, GPP +1.2%, GPP +1.2%,CBR +1%, RIG +1%, SDRL +0.9%, MT +0.9%, MOS +0.7%
Gapping down: INST -19.4%, NLS -11.9%, MCEP -10.8%, TEX -7.9%, STRL -7.3%,RAIL -6.2%, LB -5.4%, THC -4.9%, THC -4.9%, NETE -3.5%, MPWR -3%, HCLP-2.7%, APC -2.4%, DKL -2.4%, EFC -2.3%, SBGL -2.1%, BP -2.1%, BKD -2.1%, OXY-1.2%, PFE -1%
Gapping down: INST -19.4%, NLS -11.9%, MCEP -10.8%, TEX -7.9%, STRL -7.3%,RAIL -6.2%, LB -5.4%, THC -4.9%, THC -4.9%, NETE -3.5%, MPWR -3%, HCLP-2.7%, APC -2.4%, DKL -2.4%, EFC -2.3%, SBGL -2.1%, BP -2.1%, BKD -2.1%, OXY-1.2%, PFE -1%
Panasonic: A Safer Bet on Tesla Than Tesla Itself
A plunge in Panasonic’s shares offers a safer entry point for exposure to electric cars
In Tesla’s case, it may be better to own the battery than the electric car.
Japanese electronics giant Panasonic is the sole supplier of batteries to Tesla’s Model S, Model X and Model 3. Its shares plunged nearly 7% Tuesday after it slashed its adjusted operating profit forecast for this fiscal year by 17%. But the reasons for the fall may just be entry points for the stock.
The main blame for cutting the operating profit forecast was astronger yen, though it is hard to see how investors hadn’t seen that one coming. The other reason: an earlier-than-expected investment in the so-called gigafactory supplying Tesla. Panasonic spent ¥15 billion ($143 million) on the factory, which sits on more than 3,000 acres in the Nevada desert, in the six months ended September. It expects to sink in more in the second half.
Though the cash outlay hurts Panasonic’s earnings in the short term, it may not be all bad. While ultimately it depends on whether Tesla, which is notorious for missing its self-imposed production deadlines, is timely indelivering on its latest promises on its mainstream Model 3 sedan, the need to bring forward the investment schedule may mean returns could come earlier than expected, too. The company raised ¥400 billion yen through issuing bonds with a maximum coupon of a mere 0.47% in September, so funding is both secured and inexpensive.
Anyway, the ramping up of the investments has shaved only 3% off Panasonic’s forecast for adjusted operating profit. The bulk of the reduction comes from the impact of the yen, which has appreciated 15% versus the dollar over the past year. Panasonic reports its results in yen, but a big part of its sales is in other currencies, so a rising yen hurts its earnings. Worse still, its earnings have become more sensitive to a strengthening yen as it relies more on exports.
Stripping away the currency effects, Panasonic’s core appliance and automotive businesses are, in fact, pretty stable, and the stock offers a sustainable 2% dividend yield. Panasonic trades at 12 times next fiscal year’s expected earnings after the selloff, according to S&P Global Market Intelligence. Analysts may follow the company to adjust down their forecasts, but that is still a safer and cheaper bet on an electric-car future than Tesla itself.
Germany Cools to Chinese Investors After Record Year for Takeovers
Chinese takeovers of German companies are happening at a pace of about one a week
Germany’s openness to Chinese investment is waning quickly, potentially chilling diplomatic relations between the giant trading partners.
Beijing on Monday summoned a senior German embassy official to discuss Berlin’s recent decision to halt the takeover of a German chip maker by a Chinese fund on security grounds.
The German government on Oct. 21 withdrew approval for a €670 million ($736 million) purchase of Aixtron SE by the German unit of China’s Fujian Grand Chip Investment Fund LP.
Chinese officials in Berlin declined to comment on the dispute.
German Chancellor Angela Merkel’s spokesman Steffan Seibert said Monday that Germany was “right in being open toward investments from abroad and, of course, from China,” but stressed a need for “fair investment and competition conditions in an international context.”
“The key here is reciprocity,” Mr. Seibert said. Germany “must be protected effectively against unfair competition,” he said.
The issue is likely to arise when German Economics Minister Sigmar Gabriel arrives for a planned visit to China on Tuesday, accompanied by almost 60 representatives of German industry. His office said Monday that the growing appetite from China for German businesses had made investment reciprocity a priority.
ENLARGE
Berlin’s revocation of approval for the Aixtron deal, which had been granted Sept. 8, came as German regulators are also scrutinizing a takeover of Osram Licht AG’s lightbulb and LED business—the world’s No. 2 lighting maker—by China’s Sanan Optoelectronics Co.
Berlin in June tried to head off a $5 billion bid for German robotics firm Kuka AG from Midea Group of China by orchestrating a European counterbid. Despite exhortations from Ms. Merkel, no offer emerged and Midea acquired Kuka in August.
Opposition has increased during a record year for Chinese takeovers of German companies, which are happening at a pace of about one a week, according to data provider Dealogic. Chinese companies have spent more than $11 billion on German companies since January, eclipsing the previous full-year record of $2.6 billion in 2014, and making Germany the top European target for China this year.
Many Chinese investors want access to German engineering and manufacturing know-how. Some in Germany, around Europe and in the U.S. worry China could use such technologies for military purposes or become a fiercer manufacturing rival.
Many observers note that Chinese companies can more easily invest in Europe than vice versa. Some policy makers worry that much of Europe lacks an equivalent of the Committee on Foreign Investment in the U.S., which vets takeovers for national-security risks.
“There is no strategic thinking on foreign investment in Europe,” said Markus Ferber, a senior German member of the European Parliament from a party allied to Chancellor Merkel. “If it makes sense from a market perspective, then the deals can go through.”
After simmering for several months, the subject came to a boil with Berlin’s Aixtron reversal.
“It’s the deal that broke the camel’s back,” said Sophie Meunier,researcher into Chinese overseas investment at Princeton University. “There’s a real fear that the technology is going to leave Germany.”
Aixtron produces a range of high-tech products, but analysts say its research prowess in semiconductors is what the Chinese want. Aixtron is a market leader in the technology, which has both commercial and military uses.
James Lewis, director of the Strategic Technologies Program at the Center for Strategic and International Studies in Washington, said the U.S. Department of Defense has for years tried to frustrate China’s attempts to build up semiconductor capabilities.
“It could go on a nuclear weapon, it could go on a cruise missile, any fighter aircraft,” Mr. Lewis said, adding he thought the deal was likely directed by Beijing.
Chinese pursuit of German companies is “not just business; it’s business driven by the Chinese state,” said Nadège Rolland, senior fellow at the National Bureau of Asian Research in Washington.
A spokesman for Fujian Grand Chip’s German unit declined to comment on suggestions the Chinese government stood behind efforts to buy Aixtron. Grand Chip owner Liu Zhendong said in a recent interview with German magazine Spiegel that the Chinese government didn't play any role in the bid.
Berlin’s about-face angered Aixtron’s largest shareholder, Edinburgh-based Argonaut Capital Partners. Chief ExecutiveBarry Norris called the move “protectionist posturing” and said Aixtron chips weren't used in China’s nuclear-weapons programs. Argonaut said it owns 6% of Aixtron’s stock.
Speculators are snapping up a new virtual currency known as Zcash that was designed by university academics and built to be all but untraceable.
Investors were paying over $1,000 for a single unit of Zcash on Monday, a few days after the currency was first brought online.
The company behind Zcash, led by a developer named Zooko Wilcox, has the support of privacy activists and computer scientists at Johns Hopkins University and Massachusetts Institute of Technology. It has already secured $3 million in backing from a number of Silicon Valley venture capitalists who are involved in the virtual currency industry.
Zcash’s developers say they have used advanced cryptography to create a virtual currency that can be sent around the world essentially without a trace, unlike Bitcoin.
While Bitcoin was initially described as an anonymous currency, its transactions are recorded on a public ledger that can be tracked and traced by law enforcement. Each Bitcoin user has an address, made up of letters and numbers, and the authorities are often able to link an address to a real person using sophisticated data analysis.
In contrast, Zcash uses a method developed by a team of cryptographers working at M.I.T. and in Israel — known as zk-Snark — that allows transactions to be confirmed by the network without anyone recording the Zcash addresses involved in the transactions. Users can opt out of this privacy function.
The privacy features of Zcash could make it harder for the currency to win support from regulators and bankers.
Investigators have used Bitcoin’s ledger, known as the blockchain, to track down some people selling drugs for Bitcoins on black market websites.
Such websites have proliferated since the first popular black market site, the Silk Road, was taken down in late 2013.
Since the demise of the Silk Road, mainstream financial institutions have shown significant interest in virtual currencies and particularly in the blockchain technology, which provides a new decentralized way to keep financial records and to power transactions of all sorts. Major central banks have recently been talking about using the technology for their own currencies.
Most projects in the virtual currency area, though, have been pushing in directions that would make it easier to integrate with the existing financial system.
Jonathan Levin, a founder of Chainalysis, a start-up that helps banks and regulators track activity on blockchains, said that the authorities had become comfortable with virtual currencies because they had been able to trace transactions in cases of criminal activity.
“It’s going to be quite difficult for Zcash in its opaqueness to show that, no, it is not all bad stuff going on,” he said.
But Mr. Wilcox has the help of a former top New York state financial regulator and a former federal prosecutor to help ease the concerns of government officials. Mr. Wilcox is hosting an open virtual meeting later this month with law enforcement officials from across the country to explain the project.
Mr. Wilcox and the programmers who created Zcash say that they developed the currency not to facilitate illegal activity but to provide a degree of privacy for people who do not want their financial transactions visible to the world.
“The basic story is that we have been gradually losing our privacy in a whole bunch of ways that people don’t appreciate,” said Matthew Green, an assistant professor at Johns Hopkins who began developing Zcash with some of his graduate students in 2013. “This brings back a little bit of that privacy that computers have taken away from us. This technology gives us a defense against something that until now we have been defenseless against.”
Mr. Wilcox said that existing virtual currencies have been unattractive to businesses because their transaction details are exposed to competitors, creating a business need for a more private virtual currency.
“All of the conversations I’ve had with businesses, banks, regulators and law enforcement have been about the need for data security for commercial applications,” he said.
Zcash is modeled closely on Bitcoin. The currency will be released slowly to computers that help support the network underlying the currency. New Zcash units will be distributed to users until there are 21 million of them in the world. Initially Zcash units are being released slowly — as of Monday, only about 1,500 were out in the world, helping to feed the speculative frenzy around the currency.
The concepts behind Zcash were developed by Mr. Green and other academics, but the project is being run by a for-profit Delaware corporation, Zcash Electric Coin Company, which is led by Mr. Wilcox. The corporation, developers and early investors will be compensated by what amounts to a 10 percent charge on all the new Zcash generated by users during the first four years of operation. Some of these coins will also be directed to a nonprofit Zcash foundation.
There have already been several efforts beyond Zcash to correct for the privacy shortcomings of Bitcoin. Many Bitcoin users run their coins through so-called tumblers that can obscure the origin of transactions.
Another relatively new virtual currency, Monero, came with anonymity built into the system. Earlier this year it was seized upon by speculators who pushed up the value of Monero significantly before the price fell back down. Unlike Zcash, Monero can already be used for purchases on black market websites.
Mr. Green, the Zcash developer, said that some people may look to the currency for illegal purposes. But he believes that ultimately the privacy it provides will secure its importance to the mainstream economy.
“You are going around on the Bitcoin blockchain leaving a trail of everything you do, which will last forever,” he said. “The idea of Zcash is you don’t have to go to special lengths to achieve privacy — privacy is baked into the system.”