Elliott Management Corporation

Elliott Management Corporation
Holding company
Industry Financial services
Founded New York City
1977
Founder Paul Singer
AUM IncreaseUS$ 31 billion (2017)[1]
Website Elliottmgmt.com

Elliott Management Corporation is an American hedge fund management firm. It serves as the management affiliate of American hedge funds flagship Elliott Associates L.P. and Elliott International Limited. Elliott was founded by Paul Singer, who also serves as CEO of the management company, which is based in New York City. From inception, Elliott has generated for its investors a 14.6% net compound annual return, compared to 10.9% for the S&P 500 stock index, and now has more than US$23 billion in assets under management.[2][3] As of the first quarter of 2015, Elliott's portfolio is worth over $8 billion.[4][5] By 2009 "more than one-third of Elliott’s portfolio was concentrated in distressed securities, typically in the debt of bankrupt or near-bankrupt companies."[6] Elliott has widely been described as a vulture fund.[7][8][9][10]

Overview

Paul Singer created Elliott Associates in January 1977,[11] starting with $1.3 million from friends and family. (Elliott is his middle name.)[12] In its earliest years, the firm focused on convertible arbitrage. Since the 1987 stock market crash and early 1990s recession, however, the firm has transitioned into a multi-strategy hedge fund.[13][14] Elliott Associates manages $8.6 billion and is Elliott Management's primary domestic fund.[15]

Elliott is noted for its relatively high returns and low volatility. The New York Times has called Paul Singer "one of the most revered" hedge fund managers on Wall Street.[6] Elliott returns have generally outpaced the annual growth of the S&P 500. Describing Singer in 2012 as "one of the smartest and toughest money managers in the business," Fortune noted that over the previous 35 years, he had "produced an extraordinary 14% average annual return after fees, nearly double the price appreciation of the S&P 500."[12] From inception, Elliott has generated for its investors a 14.6% net compound annual return, compared to 10.9% for the S&P 500 stock index,[16] while having only one-third of the index's volatility.[17] The firm is currently closed to new investors. As of mid-2008, Elliott counted 175 employees in New York City, London, Tokyo and Hong Kong[14] and is one of the oldest hedge funds under continuous management.[18]

In a November 2014 investment letter, Elliott described optimism about U.S. growth as unwarranted. "Nobody can predict how long governments can get away with fake growth, fake money, fake jobs, fake financial stability, fake inflation numbers and fake income growth," Elliott wrote. "When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors."[19]

In 2015, Institutional Investor/Alpha magazine gave Elliott an A grade and the #9 ranking among hedge funds worldwide.[20]

Equity partners

Elliott has four equity partners. Paul Singer and Jon Pollock are co-chief investment officers; Gordon Singer, Paul Singer's son, runs Elliott’s London office. Steven Kasoff, formerly the firm's senior portfolio manager, was also given the title of equity partner in January 2015.[21]

Affiliates and units

Investments

Early activities

Early in its history, Elliott focused on convertible arbitrage, refocusing primarily on distressed debt investing following the 1987 stock market crash and early 1990s recession. Elliott is known for restructuring such U.S. firms as TWA, MCI, WorldCom, and Enron[28] as well as overseas companies including Telecom Italia SpA and Elektrim.

Wella AG

In 2003, Elliott believed P&G was not offering a fair price to all preferred shareholders for the German hair products company Wella AG. Elliott joined other funds in opposing the deal, including Germany's second-largest fund manager, Deka Investments. After several years of legal and shareholder battles, P&G raised its offer for Wella AG for all preferred shareholders.[14] According to the Börsen-Zeitung, Elliott said its goal was to "protect the rights of minority shareholders."[29]

Shopko

In April 2005, the Wisconsin-based retail chain Shopko announced that it had agreed to be acquired for approximately $1 billion by a private equity firm at a price of $24 per share.[30] This and a subsequent offer at $25 were rejected, according to the Milwaukee Business Journal, "after several dissident shareholders threatened to vote down the transaction, claiming the bid was too low." Elliott joined other hedge funds in opposing the sale because it felt the price was too low and because it had concerns about conflicts of interests on the board.[31][32] Elliott eventually participated in purchasing ShopKo at $29 per share.[33]

Adecco

The human resource consulting company Adecco announced in January 2006 it had secured a 35 percent stake in DIS AG, at a price of €54.5 per share, making an offer at that price for all shares.[34] The company also announced that the DIS CEO and CFO had signed lucrative management agreements that eventually would make them CEO and CFO, respectively, of Adecco.[35] Adecco attempted to de-list DIS but was blocked in court by a number of hedge funds, including Elliott. The funds also raised concerns about conflict of interest by the CEO and CFO. Eventually Adecco offered €113 per share, which was accepted.[34]

Novell

In March 2010, Elliott bid $5.75 per share for software company Novell. Although Novell rejected the offer, Elliott "welcomed" the decision to sell the company.[36]

Vinashin

In December 2011, it was reported that Elliott was suing the Vietnamese shipbuilding firm Vinashin in a British court. The company had defaulted a year earlier on a $600 million loan backed by the Vietnamese government, then offered to pay bondholders 35 cents on the dollar. Elliott sued for the full amount.[37] In April 2012 Elliott dropped the case. [38]

Compuware

It was reported in December 2012 that Elliott, which already had an 8% stake in Compuware, had offered to buy the company for $11 a share in cash.[39]

Hess

In late 2012, Elliott criticized the oil company Hess for its use of capital and for being "distracted" from oil exploration and production by other activities. In January 2013, Elliott called on Hess to sell certain assets and asked Hess investors to vote for five new directors as part of an effort to reconfigure the oil firm and thus boost its share price.[40] "Buried within Hess Corp. is one of the premier U.S. resource play-focused companies," Elliott wrote.[41]

In March, Hess announced that it was acting on some of Elliott's suggestions, but Elliott said that Hess's changes fell far short of what was needed.[42] In April, it was reported that Hess would close its London office on Elliott's advice.[43] Hess has been a "top pick" for Elliott since 2013.[44] As of the fourth quarter of 2014, Elliott owned 17.8 million shares of Hess, worth $1.3 billion, making it Elliott's largest holding.[5]

Interpublic Group

In summer 2014, Elliott disclosed a 6.7% stake in Interpublic Group of Companies, an ad agency holding company, and "a person briefed on the matter said Elliott planned to call on the company to sell itself to one of its competitors".[45]

Sigfox

Elliott is one of several firms that, according to a February 2015 report, have invested in the Sigfox cellular network, which serves France, Spain, the UK, and the Netherlands.[46]

Solar projects in UK

In February 2015, the Telegraph reported that Elliot Management's UK arm, Elliott Capital Advisors, had put money into half a dozen unnamed solar-power projects in that country, and that it had "hedged its bets by taking out short positions in five other renewable energy funds listed on the London stock market."[47]

Comcast

In September 2015, Elliott purchased a 1,902,642 stake in Comcast, a Philadelphia-based mass media company, for an average price of $58.68 a share. This transaction had a 1.65% impact on Elliott's portfolio.[48][49]

CDK Global LLC

Elliott acquired a 4% stake in CDK Global in May 2015.[50] As of September 2016, it was holding a 5.4% stake in the company and is the third-largest shareholder.[51]

On May 4, 2016, Elliott sent a letter to CDK Board of Directors outlining steps they felt were required in order to meet projected ROI and margins. Quoting "a plan for CDK to optimize its business operations and drive a meaningful improvement in shareholder value."[52]

On June 8, 2016, Elliott sent a letter to CDK Board of Directors advising that "CDK adopt the steps in the Value-Maximizing Plan without delay" due to share-holder support of the plan in the May 4th letter.[53]

Cabela's

In October 2015, Elliott disclosed an 11.1 percent stake in Cabela’s, an outdoor recreation and clothing retailer reporting that it is seeking to engage the company's board to discuss strategies and a potential sale of the company.[54][55]

Real estate

Since 2010, Elliott Management has expanded into investing in distressed real estate. It has been active in Japanese and German real estate and in 2015 viewed Spain and Italy as offering attractive investment opportunities.[21] Now, according to the New York Times, it has "teams of analysts and portfolio managers in London, Hong Kong and Tokyo and investments worth more $2 billion." In the U.S., it "has focused on filling in the gap where banks have had to rein in their lending by participating in direct financing with developers."[56]

In 2013, Elliott Management teamed up with Time Equities on a 63-story commercial and real estate project in New York, and took an ownership stake in Silverpeak Real Estate Finance, a commercial real estate lender.[56]

The New York Times reported in May 2014 that Elliott Management was financing the development of 5 Beekman Street, a 130-year-old building at the site of one of Manhattan’s first skyscrapers, into a 287-room hotel and 46-story condominium called the Beekman. The project would be carried out by GFI Capital Resources, a New York real estate company.[56]

Sovereign debt

A portion of Elliott's distressed securities trading has been in sovereign debt.[57]

Argentina

After Argentina defaulted on its sovereign debt in 2002, Elliott, which owned Argentinian bonds with a nominal face value of $630 million now worth $2.3 billion, refused to accept Argentina's offer of less than 30 cents on the dollar. Elliott won judgments against Argentina in U.S. and U.K. courts but did not collect payment. In October 2012, an Elliott subsidiary, NML Capital, arranged for the seizure in Ghana of the ARA Libertad, an Argentinian naval vessel, which it intended to confiscate in accordance with court judgments awarding it over $1.6 billion in Argentinian assets.[58] A November 2012 New York trial, which ended in a ruling for NML and against Argentina; legal experts called it the "sovereign debt trial of the century." Argentina was given until 29 March 2013 to submit a new payoff plan.[59] When the new plan proved to be essentially identical to previous offers, Kirchner was accused of "thumb[ing] her nose at the US court system."[60][61] NML was given three weeks to respond to Argentina's offer.[62] In a letter published in the Financial Times, legal experts Andreas F. Lowenfeld and Peter S. Smedresman defended NML's position.[63] Argentina's offer was dismissed on 23 August 2013, by the U.S. Court of Appeals for the Second Circuit.[64]

Congo

Elliott exposed corruption in the Republic of the Congo in its efforts to enforce judgments totaling more than $100 million in defaulted bank debt.[65][66] In 2008, Elliott bought $32.6 million in loan debt incurred by Congo, allegedly for less than $2.3 million. In 2002 and 2003, a British court awarded Elliott more than $100 million for these debts, $39 million of which was subsequently recouped by interception of proceeds of the sale of oil by the Congo to Glencore International.[67] During the case, US President George W Bush used a constitutional clause preventing seizure of Congolese assets in the United States by the hedge fund.[68] Brice Mackosso, a campaigner for greater transparency and anti-corruption in the Congo Republic's government, stated that if it were not for funds like Elliott, "we would not know any facts about the way our country’s wealth is being taken away."[57] After Elliott's investigations produced evidence of corruption, the government settled for an estimated $90 million on debt for which Elliott paid less than $20 million.[12]

Peru

In 1995, Elliott bought $20 million face value of defaulted Peruvian bank debt. After extensive litigation and numerous attempts by Elliott to settle, the court awarded the hedge fund $58 million, including past due interest.[69]

References

  1. ↑ "Highest-Earning Hedge Fund Managers 2017--#6 Paul Singer". Forbes. Retrieved 21 March 2017.
  2. ↑ Carreyrou, John (11 February 2013). "Hedge Funds Clash Over Argentina Debt". Wall Street Journal. Retrieved 14 February 2014.
  3. ↑ Elliott Management. "Elliott Management Releases ISS Presentation". Yahoo! Finance. Retrieved 12 June 2013.
  4. ↑ "Hedge Fund - Elliott Management". Insider Monkey. Retrieved 17 June 2015.
  5. 1 2 "Paul Singer Bio, Returns, Net Worth". Insider Monkey. Retrieved 16 April 2015.
  6. 1 2 Kouwe, Zachery (19 August 2009). "Summer Reading: Paul Singer’s 2nd-Quarter Letter". The New York Times. Retrieved 24 February 2016.
  7. ↑ Fuller, Jaime (April 4, 2014). "Meet the wealthy donor who’s trying to get Republicans to support gay marriage". Washington Post. Retrieved 22 October 2015.
  8. ↑ Armitage, Jim. "Can you make an ethical case for vulture funds?". The Independent. Retrieved November 29, 2015.
  9. ↑ Palast, Greg; O'Kane, Maggie; Madlena, Chavala (November 15, 2011). "Vulture funds await Jersey decision on poor countries' debts". The Guardian. Retrieved August 3, 2015.
  10. ↑ Sheehan, Michael (November 15, 2011). "Vulture funds – the key players". The Guardian. London. Retrieved June 10, 2012.
  11. ↑ "Company Overview of Elliott Management Corporation". Businessweek. Retrieved 31 May 2013.
  12. 1 2 3 Celarier, Michelle. "Mitt Romney's hedge fund kingmaker". CNN. Retrieved 13 June 2013.
  13. ↑ "Elliott Management Sends Letter to Board of Directors of EMC Corporation". Business Wire. 8 October 2014. Retrieved 16 April 2015.
  14. 1 2 3 Foroohar, Kambiz (February 2008). "The Opportunist" (PDF). Bloomberg Markets. Retrieved 3 October 2010.
  15. ↑ Copeland, Rob (7 July 2014). "Elliott Associates Hedge Fund Gained 4.6% in First Half". Wall Street Journal. Retrieved 16 July 2014.
  16. ↑ Elliott Management Corporation, retrieved 3 October 2010
  17. ↑ Salmon, Felix (February 2004), "Elliott Associates' aggression captures low-risk returns", Euromoney, retrieved 3 October 2010
  18. ↑ Barr, Alistair (11 December 2009), Hedge fund giant Elliott ramps up in wake of credit 'party', retrieved 3 October 2010
  19. ↑ Bit, Kelly (4 November 2014). "Singer’s Elliott Says Optimism on U.S. Growth Unwarranted". Bloomberg. Retrieved 16 April 2015.
  20. ↑ Taub, Stephen. "The Hedge Fund Report Card" (PDF). Institutional Investor's Alpha. Retrieved 4 March 2016.
  21. 1 2 Chung, Juliet (30 January 2015). "Elliott Management Names Fourth Equity Partner". Wall Street Journal. Retrieved 16 April 2015.
  22. ↑ SEC. "Proxy Statement". UNITED STATES SECURITIES AND EXCHANGE COMMISSION. Retrieved 13 June 2013.
  23. ↑ Kandell, Jonathan (23 February 2016). "How Macri Could Woo Singer and Other Bond Holdouts". Institutional Investor. Retrieved 24 February 2016.
  24. ↑ The Guardian (15 November 2011). "Vulture funds – the key players". London: The Guardian. Retrieved 13 June 2013.
  25. ↑ MEDION AG (18 May 2012). "MITTEILUNGEN ÜBER STIMMRECHTSANTEILE AN DER MEDION AG". Retrieved 13 June 2013.
  26. ↑ Elliott Advisors (5 July 2012). "ELLIOTT ADVISORS (UK) LIMITED" (PDF). Reuters. Retrieved 13 June 2013.
  27. ↑ Holland & Knight. "Bruce W. MacLennan Bio". Retrieved 13 June 2013.
  28. ↑ Beth Jinks (10 January 2014). "Elliott Funds’ Flurry a ‘Harbinger’ of Activist New Year". Bloomberg News.
  29. ↑ Waxley, Simon; Tuil, Frank (2 February 2005), "Rights for All – How the Fight for Wella is a View of the Future", Börsen-Zeitung
  30. ↑ "New bidders propose $26.50 per share for ShopKo" (Press release). The Business Journal of Milwaukee. 3 October 2005. Retrieved 3 October 2010.
  31. ↑ "Elliott Files Schedule 13D Disclosing Substantial ShopKo Ownership; Strongly Opposes Current Offer for the Company" (Press release). PR Newswire. 6 September 2005. Retrieved 3 October 2010.
  32. ↑ Hajewski, Doris (7 September 2005), "ShopKo sale may be in danger", Milwaukee Journal Sentinel, retrieved 3 October 2010
  33. ↑ "ShopKo agrees to $29 a share offer from Sun Capital", The Business Journal of Milwaukee, 18 October 2005, retrieved 3 October 2010
  34. 1 2 "Permission given to Adecco to Delist DIS", Borsen-Zeitung, 12 June 2008
  35. ↑ "German DIS Minority Shareholders Oppose Swiss Parent Adecco", German Business Digest, 21 April 2006
  36. ↑ Savitz, Eric (22 March 2010). "Novell: Elliott "Welcomes" Decision To Consider Possible Buyers". Retrieved 3 October 2010.
  37. ↑ Luochang Yu, Bob (13 December 2011). "Elliott Associates Is Suing Vietnam-based Vinashin". Retrieved 13 June 2013.
  38. ↑ http://www.finalternatives.com/node/20077
  39. ↑ Savitz, Eric (17 December 2012). "Compuware Gets $11/Shr Bid From Elliott Management". Forbes. Retrieved 13 June 2013.
  40. ↑ DEALBOOK (29 January 2013). "Elliott Management Calls for Board Shake-Up at Hess". The New York Times. Retrieved 13 June 2013.
  41. ↑ WSJ (29 January 2013). "Activist Investor Elliott Management Seeking to Remake Hess". Wall Street Journal. Retrieved 13 June 2013.
  42. ↑ BusinessWire (4 March 2013). "Elliott Management Responds to Hess Corporation Shareholder Letter and Presentation". Retrieved 13 June 2013.
  43. ↑ Telegraph (3 April 2013). "London Office Closure". The Daily Telegraph. Business Section. p. 3. Retrieved 12 June 2013.
  44. ↑ Erbar, Pablo (28 February 2015). "Billionaire Paul Singer is Bullish and Bearish About These Energy Stocks". Insider Monkey. Retrieved 16 April 2015.
  45. ↑ de la Merced, Michael J., "Paul Singer Takes Stake in Advertising Titan Interpublic and Pushes for Sale", New York Times, 24 July 2014. Retrieved 2-014-07-24.
  46. ↑ Lunden, Ingrid (11 February 2015). "Sigfox Raises $115M To Take Its Internet of Things Network Global". Tech Crunch. Retrieved 16 April 2015.
  47. ↑ Dakers, Marion (7 February 2015). "Hedge fund makes £100m bet on British solar power". Telegraph. Retrieved 16 April 2015.
  48. ↑ "Paul Singer Acquires Stake in Comcast". NASDAQ. 25 September 2015. Retrieved 27 September 2015.
  49. ↑ "On Sale: Accumulation by this Activist Could Wake Up Sleepy Comcast (CMCSA)". Street Insider. 18 September 2015. Retrieved 27 September 2015.
  50. ↑ "With Elliott Management, CDK Now Has Its Third Activist".
  51. ↑ "CDK Global Inc. (CDK) Lowered to Hold at Zacks Investment Research".
  52. ↑ "May 4 etter to CDK Board of Directors" (PDF).
  53. ↑ "June 8 letter to CDK Board of Directors" (PDF).
  54. ↑ Moyer, Liz. "Elliott Management Takes 11% Stake in Cabela’s". New York Times. Retrieved 29 October 2015.
  55. ↑ "Elliott Discloses 11.1% Stake in Cabela’s". Wall Street Journal. 28 October 2015. Retrieved 29 October 2015.
  56. 1 2 3 Stevenson, Alexandra (23 May 2014). "Elliott Management Backs Skyscraper Revival". New York Times. Retrieved 16 April 2015.
  57. 1 2 Polgreen, Lydia (10 December 2007). "Unlikely Ally Against Congo Republic Graft". New York Times. Retrieved 16 October 2013.
  58. ↑ Whitehouse, Kaja. "Argentina says 'Arrh, no!' to Paul Singer’s $20 million demand for seized ship". New York Post. Retrieved 13 June 2013.
  59. ↑ Celarier, Michelle. "Cristina’s crumble: Argentina prez may offer Singer deal". New York Post. Retrieved 13 June 2013.
  60. ↑ Van Voris, Bob. "Argentina ‘Greek Tragedy’ Nears End as Debt Ruling Looms". Bloomberg Businessweek. Retrieved 13 June 2013.
  61. ↑ Celarier, Michelle. "Argentina sticks to its guns on debt payout". New York Post. Retrieved 13 June 2013.
  62. ↑ Raymond, Nate (2 April 2013). "UPDATE 2-US court demands Argentine bondholders address pay plan". Reuters. Retrieved 11 June 2013.
  63. ↑ Lowenfeld, Andreas; Smedresman, Peter. "Understand the proper role of courts". Financial Times. Retrieved 24 February 2016.
  64. ↑ UNITED STATES COURT OF APPEALS, FOR THE SECOND CIRCUIT (23 August 2013). "12-105(L) NML Capital, Ltd. v. Republic of Argentina" (PDF). Clarin. Retrieved 23 August 2013.
  65. ↑ The Debt Frenzy, Foreign Policy, July/August 2007
  66. ↑ The Debt Frenzy, MyWire, 1 July 2007
  67. ↑ Foroohar, Kambiz (8 January 2008). "Vulture Fund Founder Singer Helps Back Giuliani Bid (Update1)". Bloomberg. Retrieved 10 June 2012.
  68. ↑ Palast, Greg (August 7, 2014). "How Barack Obama could end the Argentina debt crisis". The Guardian. Retrieved March 29, 2016.
  69. ↑ Bosco, David (11 June 2007), "The Debt Frenzy", Foreign Policy, retrieved 3 October 2010
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