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Energy Journal: Libya Struggles to Export Oil, U.S. Struggles Not To

Wall Street Journal MoneyBeat - 1 hour 47 min ago

Here’s your morning jolt of news, insight and analysis on the global energy business. Send us tips, suggestions and complaints: cassie.werber@wsj.com

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Still in flames 

Black smoke billows from a fuel-storage depot near the airport in Tripoli on July 28 after it was hit by a rocket.
EPA

For months, Libya has tried to solve the disputes that kept its oil out of the global market.

In June, it looked like a deal had been reached. Two large oil fields resumed production, reported Benoît Faucon of The Wall Street Journal.

A week ago, the first international export from the largest field of all, the Sharara field in western Libya, was hailed.

Much of Libya’s production and export had been halted since last summer by disputes between a beleaguered government and rebel groups over who should control—and get paid for—Libya’s oil wealth.

Now that the oil can be exported again, new problems have arisen.

Firstly, the international market isn’t willing to pay the prices Libya wants to charge for it.

Despite Libya already cutting prices for the high-quality crude, “oil buyers want cheaper prices” to make up for the risk of disruptions, an official overseeing the port operations told The Journal earlier this month.

And the effect cuts both ways. Libya re-entering the market means more oil, which pushes down benchmark prices—which makes buyers even less willing to pay a premium.

Secondly, Libya’s return to market is by no means smooth. Protesters have disrupted the movement of crude.

On Saturday, fuel tanks caught fire during fighting near Tripoli airport. Yesterday another tank ignited. The fires are being fought by specialist planes sent by the Italian government and oil company Eni, which owns interests in Libya. But they’re not out yet.

Knotty problem

Elsewhere in oil, the U.S. has put on hold two companies’ requests for permission to sell “condensate,” Reuters reports.

Condensate is a part-processed form of oil at the very light end of the spectrum. It is mainly derived from shale, and so has become more plentiful in the U.S. in recent years.

The prospect of some crude oil export becoming more likely, via the condensate route, first came to light in June.

Since then it has been the subject of intense discussion, including technical wrangling on questions such as “what is crude?” and “what is a product?” and the definition of a distillation tower.

The issue is thorny because the U.S. has a ban on crude oil exports dating back to the 1970s. It was brought in when the Middle East cut off export to the U.S., resulting in gasoline shortages and fuel queues.

Untangling emotion, memory and fear of a repeat situation will be part of the process toward any meaningful export.

Markets

Brent crude oil prices were slightly up Tuesday morning and U.S. oil was almost unmoved as traders shrugged off the likelihood of increased sanctions against Russia. The latest comment is here.

Categories: Transactions

Klépierre Agrees to Acquire Dutch Rival in $9.7 Billion Deal

New York Times DealBook - 2 hours 12 min ago
The all-stock deal to acquire Corio would create a combined company that owns 182 shopping centers worth more than $28 billion in 16 countries in Europe, with annual rental income of more than $1.6 billion.
Categories: Transactions

Morning MoneyBeat: Bearish Stock Bets Mount

Wall Street Journal MoneyBeat - 2 hours 31 min ago

Morning MoneyBeat is the Journal’s pre-market primer packed with market updates, insights and must-read news links. Click here to receive this morning newsletter via email

MARKET SNAP: At 6:10 a.m. ET, S&P 500 futures down 0.1%. 10-Year Treasury yield lower at 2.47%. Nymex down 3 cents at $101.64. Gold 0.4% higher at $1310.80. In Europe, FTSE 100 up 0.2%, DAX up 0.1% and CAC 40 up 0.01%. In Asia, Nikkei 225 up 0.6% and Hang Seng up 0.9%.

WATCH FOR: May S&P Case-Shiller 20-City Home-Prices Index (9:00): seen +9.9%; previously +10.8%. July Consumer Confidence (10:00): seen 85; previously 85.2. Aetna, Afflac, Ally Financial, American Express, Ameriprise, Amgen, DreamWorks, Express Scripts, Marriott, Merck, New York Times, Nielsen, Panera Bread, Pfizer, Twitter, UPS and Waste Management are among companies scheduled to report quarterly results.

THE BREAKFAST BRIEFING

An ominous signal is rising from the options market, where the pile of bearish options bets is growing larger by the day.

The average of outstanding “put” options on the S&P 500 and the S&P 100 indexes last week rose to twice the number of bullish “call” options, said Jason Goepfert, founder of Sundial Capital Research.

Only twice during the past 20 years has that ratio been so lopsided to the bearish side — in mid-February 1996 and in July 2007, Mr. Goepfert said.

Both times, the market floundered in the weeks and months ahead.

“Mostly,” Mr. Goepfert wrote, “the higher the [put/call ratio], the more likely stocks would struggle.”

Investors generally buy put options, which confer the right to sell shares at a set price, to hedge against declines in their portfolios or to speculate outright on market drops.

The bearish bets in the options market reflect unease spreading through the stock market even as the S&P 500 hovers near a record high.

And a nearly non-stop rally has inflated stock-price valuations. The S&P 500 is trading at 15.7 times its expected earnings for the next year, up from 15.3 at the start of the year, according to FactSet. That marks the S&P’s highest price/earnings multiple in seven years and is well above its 10-year average of 13.9.

Markets have largely shrugged off flare-ups in Eastern Europe and the Middle East, but a rapid escalation in either region could exacerbate a downdraft.

The bottom line, investors say, is that market players are waiting for a whip-crack to nudge the herd higher or lower. Many appear to be buying options protection in case the next leg is down.

“The average trader is trying just to stay afloat in all these swirling tides,” says Robert Pavlik, chief market strategist at Banyan Partners, a New York-based investment advisory firm.

-By Chris Dieterich; follow him on Twitter @chrisdieterich.

STOCKS TO WATCH

Herbalife’s earnings, reported after the bell late Monday, fell short of Wall Street expectations. Shares plunged 11% in after-hours trading.

Darden Restaurants is in focus after Chairman and Chief Executive Clarence Otis Jr. stepped down late Monday. Shares in the operator of Olive Garden and other restaurant chains jumped 5.4% in after-hours trading.

Aetna is expected to report a profit of $1.59 per share and revenue of $13.99 billion, according to FactSet estimates, before Tuesday’s opening bell.

Merck & Co. is expected to report a profit of 81 cents per share on revenue of $10.6 billion early Tuesday, while Pfizer is expected to report a profit of 57 cents per share and revenue of $12.47 billion ahead of the opening.

United Parcel Service is expected to report a profit of $1.25 per share and revenue of $14.12 billion early Tuesday.

MUST READS (LINKS)

Israel Pounds Hamas Infrastructure in Gaza: ”Israeli forces pounded Hamas symbols of control and the Gaza Strip’s only power plant Tuesday in their heaviest bombardment of a 3-week offensive in Gaza, defying international demands for an immediate cease-fire after Hamas militants broke a Muslim holiday lull.”

Setbacks in Ukraine Complicate Putin Strategy: “Pro-Russia rebels in eastern Ukraine saw some of their worst battlefield setbacks in weeks Monday as the West agreed on tougher sanctions aimed at forcing Moscow to cut support for the militias—posing fresh challenges on two fronts for Russian President Vladimir Putin.”

Stock Market Regains Its Faith in Humanity: “After years of ceding ground to trading via computer programs, buying and selling stock the old-fashioned way—using humans—is holding its own.”

Battle for Poor Shoppers Fuels Dollar-Store Deal: “The battle for America’s poorest consumers intensified Monday with Dollar Tree’s agreement to buy rival Family Dollar Stores for about $8.5 billion.”

In Zillow-Trulia Deal, Making Room for Brokers: “Zillow Inc. and Trulia Inc., the two online real-estate giants that announced plans to merge, have a message for real-estate agents that have grown increasingly concerned about their market clout: We’re partners.”

BofA Deal Hung Up Over Penalties Tied to Countrywide, Merrill: “Negotiations between Bank of America and the Justice Department have hit a snag over whether the firm should pay a cash penalty for the dealings of Countrywide Financial and Merrill Lynch.”

Are Consumer IPOs Set to Go Crazy?: “Shares of Mexican restaurant chain El Pollo Loco flew the coop following its IPO Thursday, a solid return to action for the sector, which this year has produced the smallest percentage of all U.S. IPOs since 2007, according to Dealogic.”

Do Big Banks Get a Subsidy? GAO Report May Not End Debate: “A long-awaited report that’s kept Wall Street on edge will be released Thursday, when the Government Accountability Office is expected to reveal whether the nation’s biggest banks enjoy a funding advantage because they are considered ‘too big to fail’.”

Categories: Transactions

UBS Earnings: Key Takeaways

Wall Street Journal MoneyBeat - 3 hours 35 min ago
Associated Press

ZURICH—UBS AG reported second-quarter results Tuesday that seemed to meet analyst expectations, with some caveats.

The Swiss bank did post a net profit figure that topped forecasts despite having to pay out to settle a legal case regarding tax evasion among German clients. The results were bolstered by UBS’s non-core businesses, including its Corporate Center, which is partly just a repository for businesses that UBS no longer wants and is winding down.

Still, the flagship private bank continues to haul in new money at an impressive rate, and getting that German issue cleared up is seen as a positive. In addition, the bank’s overall capital and leverage ratios, which are key measures of stability, came in strong.

After a firmer start, investors traded UBS shares down 1.7% by mid-morning, the stock clearly underperforming the STOXX European banks index.

Here are the key takeaways from UBS’s earnings report, covering the three months to June 30:

Good net new money: The flagship wealth management unit saw 10.7 billion francs  ($11.8 billion) in net new money in the quarter, compared to 10.1 billion francs in the same period last year. The figure was better than many analysts anticipated, and outpaced progress on the same metric shown recently by rival Credit Suisse. It also came despite the fact that many offshore clients continue to withdraw funds as they “regularize” their tax situation at home with authorities, as the lingo has it.

Dark pool probes: Skip to page 152 of UBS’s financial report, and you’ll see the bank has disclosed that it has received inquiries from U.S. regulators including the SEC regarding its so-called dark pool alternative trading platform. UBS operates one of the biggest dark pools in the U.S. (as does Swiss rival Credit Suisse), so the news may not shock some. However, most of the media coverage of the issue has related to the dark pool operated by Barclays, which is also under investigation and drew a civil lawsuit from the New York Attorney General last month. Among the regulators probing UBS’s dark pool operation: The New York Attorney General.

Progress on German tax issue: UBS was able to announce Tuesday that it has managed to settle a probe by German authorities into the aiding of tax evasion among German clients, by agreeing to pay €300 million ($403 million). That knocked 120 million francs off second quarter profit. UBS noted that it now expects all German clients to prove they’re tax compliant by the end of the year. That pleased Zurcher Kantonalbank analyst Andreas Brun. “I thought it would take longer to do that,” Mr. Brun said. UBS is still trying to work out a similar settlement in France, but that isn’t going too well.

Smaller investment bank, bigger returns: UBS noted that it saw declines in revenues from equities and foreign exchange trading at its slimmed-down investment bank, a trend that was largely expected. But the business managed to post a return on equity of 31.3%. That’s a decline compared to the 36.9% posted in the same period last year, but also a sharp increase from the 21.5% posted for the first quarter.

Categories: Transactions

Deutsche Bank Profit Declines as It Sheds Risky Businesses

New York Times DealBook - 4 hours 53 min ago
Net profit for Germany's largest bank fell 29 percent in the second quarter to about $320 million. The bank set aside more money for legal problems, but executives focused on a 16 percent pre-tax profit increase, mostly the result of cost-cutting.
Categories: Transactions

UBS Profit Up 15 Percent in Second Quarter

New York Times DealBook - 5 hours 46 min ago
UBS reported profit of 792 million Swiss francs, or about $875 million. That compared with a profit of 690 million francs in the same period a year earlier, and was better than analysts’ expectations.
Categories: Transactions

Morning MoneyBeat Europe: The Calm Before the Data Storm

Wall Street Journal MoneyBeat - 6 hours 53 min ago

Good Morning Europe

Well, it was a lackluster Monday in the markets and Tuesday could offer little more than a rerun.

The week’s economic meat doesn’t come until later, in the form of Wednesday’s Federal Reserve policy decision and U.S. GDP data, along with Friday’s labor stats. Meanwhile,  the European Union is still mulling tougher sanctions against Russia and Israel looks to be stepping up its assaults in Gaza, so investors can’t be blamed for keeping clear if they can.

We’ll get a foretaste of the week’s groaning U.S. economic schedule with consumer confidence data later in the session, with the U.K. in focus before that, assuming geopolitics permit. Consumer credit numbers will be scrutinized for any evidence that mortgage lending is slowing.

By David Cottle

Market Snapshot: U.S. stocks (Monday close) DJIA up 0.1%, Nasdaq down 0.1%, S&P 500 flat. Nikkei now up 0.6%. September FTSE & S&P both flat. Brent crude down 12 cents at $107.45. Gold up $1.20 at $1304.50. EUR/USD now at $1.3431. USD/JPY at ¥101.97. Ten-year T-note yields 2.50%, Bund 1.15% and Gilt 2.58%.

Watch For: U.S. Consumer Confidence,

What you may have missed from MoneyBeat:

Chinese Data Don’t Add Up: When Monte Burnham, the president of Birmingham, Ala.-based Foundry Manufacturing Solutions, recently visited Tianjin, China, he was pleasantly surprised to find its air more breathable than during his previous stay.

Why U.K. Companies Should Start Thinking Smaller: Bigger is not always better, and the low productivity of large U.K. companies during the crisis seems to be a testament to this.

Oil Drillers’ About Face: Oil prospectors have long run the risk of working in violent and corrupt places for the reward of finding oil and gas reserves that can be profitably exploited. But that’s changing, writes The Wall Street Journal’s Justin Scheck. New Zealand is opening itself up to more oil exploration, and encouraging prospectors onto and around its pristine shores.

The U.K.’s Unlikely Inversion Windfall: The rush to do “inversion” deals, where two companies merge and set up headquarters in a low-tax region, is producing an unlikely winner: the U.K.

Lloyds Bit the Hand That Fed It: The rate rigging saga took a new twist Monday as Lloyds Banking Group PLC admitted to skewing a benchmark which determined the fees it paid to access taxpayer emergency funding during the crisis.

Bearish Euro Bets Becoming Stretched?: Speculators are ramping up their bearish bets on the euro, but should they?

The Lloyds Files: “Never Get Cross Wiv Yer Mate”: Authorities in the U.K. and U.S. have released transcripts of electronic conversations between traders relating to the roughly $370 million fine given to Lloyds Banking Group PLC regarding efforts to manipulate Libor.

Overnight Action:

Israel Steps Up Gaza Campaign: Israel’s leaders said they were escalating the military campaign in Gaza and told the country to prepare for a prolonged operation, defying international demands for an immediate cease-fire.

Deutsche Bank’s Profit Falls: The German bank reported a fall in second-quarter net profit to $318.5 million, compared with $448.9 million a year earlier.

Setbacks Challenge Putin in Ukraine: Pro-Russia rebels in eastern Ukraine saw some of their worst battlefield setbacks in weeks as the West agreed on tougher sanctions—posing fresh challenges on two fronts for the Kremlin.

 

Categories: Transactions

New Venture Fund Binary Capital Focuses on Mission, Not Just Metrics

New York Times DealBook - Mon, 07/28/2014 - 20:09
Jonathan Teo and Justin Caldbeck, the fund’s investors, believe the best entrepreneurs are driven by a vision, and they look for those hoping to make a global impact.
Categories: Transactions

Banks Cash In on Mergers Intended to Elude Taxes

New York Times DealBook - Mon, 07/28/2014 - 20:02
Wall Street banks are estimated to have collected, or will soon collect, nearly $1 billion in fees over the last three years advising and persuading American companies to move the address of their headquarters abroad.
Categories: Transactions

With Sale of Red Lobster Complete, C.E.O. of Darden to Step Down

New York Times DealBook - Mon, 07/28/2014 - 19:25
The chairman and chief executive of Darden Restaurants, Clarence Otis, said on Monday that he plans to step down, months after waging a heated battle with activist hedge funds opposed to his turnaround plans for the embattled company.
Categories: Transactions

The Ack Attacks are Hitting Herbalife

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 18:21
Bloomberg News

Hedge-fund manager Bill Ackman has failed to deliver the death blow against Herbalife that he’s promised, but his attacks on the nutritional supplement maker are dinging the company.

As of Monday’s close, Herbalife’s shares still traded 55% above where they did when Mr. Ackman first attacked the company’s business model in December 2012. Yet after the close, following the release of second quarter results, Herbalife’s stock dropped more than 10%.

Herbalife missed analysts’ estimates for the first time in 22 quarters. Profit fell 17% to $119.5 million, or $1.31 per share. In an interview, Chief Financial Officer John DeSimone said the decline came in part because of a difficult comparison to last year’s second quarter, which was the best in the company’s history.

In addition, part of the drop was simply a result expenses incurred by the company defending itself against Mr. Ackman’s crusade. Since Mr. Ackman began his public attacks on Herbalife, the company has spent $41 million defending itself, including $3.77 million responding to a Federal Trade Commission investigation. Mr. Ackman meanwhile said last week that he has spent $50 million on his campaign.

Mr. DeSimone said the expenses related to Mr. Ackman’s attacks will go away when the campaign does, but wouldn’t predict when that could be. “We’re not in complete control of that. What we spend is in reaction.”

Yet traders also appeared to be worried about the company’s ability to buy back stock going forward. As the trading blog Zerohedge points out, Herbalife’s cash from operations dropped for the third consecutive quarter, yet net debt is ballooning. Herbalife has been using the majority of that debt to finance stock buybacks.

Still, Mr. DeSimone said he thinks Herbalife’s addressable market for its products overall, particularly its weight-loss shakes, is expanding, largely due to the expanding waistlines in the U.S. and around the world. Herbalife has just over 1.6 million members in the U.S., while roughly 150 million people (not including children) are overweight.

“There are mega trends that work in our favor, including the population of people who are overweight,” he said. “That makes it easier to be successful.”

Mr. Ackman has repeatedly said that the so-called law of large numbers could make it difficult for Herbalife to find new recruits to keep its momentum going for revenue and profit growth.

In the most recent quarter, Herbalife added 76,000 new members in the United States, the fourth highest in the company’s history, Mr. DeSimone noted. He wouldn’t project where the number for recruits would fall going forward but pointed to the broad addressable market as a good sign.

Mr. DeSimone called Mr. Ackman’s claims that Herbalife has been pushing products by making its current salespeople sell more during training sessions “ludicruous” and failed to comment further on whether Herbalife is considering a lawsuit against the activist investor.

Categories: Transactions

Morgan Stanley to Increase Base Salaries for Junior Bankers

New York Times DealBook - Mon, 07/28/2014 - 18:00
The move is the latest by Wall Street to try to improve working conditions for those lowest on the totem pole.
Categories: Transactions

Morning MoneyBeat Asia: U.S. Stocks Hardly Stir Amid Calm Waters

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 17:47

Market Snap: At the New York close: S&P 500 up 0.03% at 1978.91. DJIA up 0.1% at 16982.59. Nasdaq Comp down 0.1% at 4444.91. Treasury yields up; 10-year at 2.492%. Nymex crude oil down 0.4% at $101.67. Gold up 0.02% at $1,303.30/ounce.

How We Got Here: The major U.S. stock indexes managed to eek out a gain on Monday, after spending most of the session in the red.

It’s likely to be the calmest day this week.

The next four sessions include a heavy slate of earnings reports, a Fed meeting, a GDP report and a jobs report. Depending upon how those numbers look and that meeting goes, somebody – either the bulls or the bears – could be dealt a rather strong hand heading into the dog days of summer.

After the bell, Herbalife reported earnings, missing Street views for the first time since 2008. Also, Darden Restaurants announced its chairman and CEO, Clarence Otis, would be stepping down – as soon as a replacement is found.

Coming Up:  Japanese labor-market and retail-sales data are in focus Tuesday. The nation’s unemployment rate is seen holding steady in June at 3.5%, the lowest level since the late 1990s, which would bolster the Bank of Japan’s confidence that a tightening jobs market will help bring the inflation rate to its 2% target. Retail sales likely continued to rebound last month after a sharp decline in April tied to the consumption tax hike.

What You Missed Overnight

Fragile Gaza Truce Breaks Down A fragile truce in Gaza for a Muslim holiday broke down Monday as a mortar shell fired from the Palestinian territory killed at four Israeli soldiers, prompting the army to resume attacks on Hamas militants.

Ukraine Reports Heavy Fighting at Flight 17 Crash Site Ukraine said on Monday that heavy fighting erupted in several towns around whereMalaysia Airlines Flight 17 went down, with the rebels reportedly losing ground as Kiev seeks to cut off their stronghold of Donetsk from the rest of separatist-held territory.

Dollar Tree Agrees to Buy Family Dollar Dollar Tree said it would buy rival Family Dollar for about $8.5 billion amid an intensifying battle for America’s poorest consumers.

U.S. Stocks Turn Higher Stocks recovered from an early loss in afternoon trading, as investors looked ahead to a busy week of data and corporate earnings.

From The Wall Street Journal Asia

McDonald’s Faces Burger Shortages at Some China Outlets McDonald’s is facing a shortage of products in some outlets across northern and central China as a result of a shift away from a Shanghai supplier that allegedly sold expired meat to some fast-food chains in the country.

Black Boxes Show Shrapnel Destroyed Flight 17 Ukrainian authorities said Monday that data retrieved from the black boxes aboard Malaysia Airlines Flight 17 showed the plane was destroyed by “massive explosive decompression” caused by shrapnel from a missile.

Nissan Reports Hefty Profit Rise Nissan Motor said Monday that sales gains in North America, China and Europe offset weakness in Japan and some emerging markets, pushing the auto maker’s fiscal first-quarter profit up 37%.

Yukos Shareholders Awarded $50 Billion An international court ruled that Russia owes shareholders of the now-defunct oil giant Yukos more than $50 billion for what it described as the Kremlin’s “devious and calculated expropriation” of assets designed to bankrupt the firm.

From MoneyBeat

Are Consumer IPOs Set to Go Crazy? Shares of Mexican restaurant chain El Pollo Loco flew the coop following its IPO Thursday, a solid return to action for the sector, which this year has produced the smallest percentage of all U.S. IPOs since 2007, according to Dealogic.

Chinese Data Don’t Add Up  Official Chinese data may be indicating that the economy is stabilizing, but there are reasons to doubt the numbers, and they go beyond China’s notoriously unreliable statistics.

Do Big Banks Get a Subsidy? GAO Report May Not End Debate A long-awaited report that’s kept Wall Street on edge will be released Thursday, when the Government Accountability Office is expected to reveal whether the nation’s biggest banks enjoy a funding advantage because they are considered “too big to fail”.

Blockchain’s Bitcoin App Reinstated by Apple Blockchain’s bitcoin app is back on Apple ’s App Store. The app, which lets users manage their Blockchain account from a mobile phone, was reinstated Monday by Apple after being booted from the store in February.

Categories: Transactions

Virgin’s Troubling Take Off

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 16:57

The birth of a new airline stock is a bittersweet affair for the sector’s investors.

Virgin America’s preliminary filing on Monday for an initial public offering demonstrated the tension. On one hand, Virgin’s IPO plans speak to the airline sector’s renewed strength. The Arca Airline index is up 24% this year, reclaiming heights not seen in a dozen years.

A big reason for that is consolidation among the major airlines, leading to better discipline—or, as passengers might call it, fewer seats and higher prices. Thing is, Virgin’s IPO, with some of the money due to be used to expand, works against this trend by raising competition. Virgin turned in its first profitable year only in 2013, and the cumulative loss over five years still amounts to $385 million.

Still, investors may focus on a positive precedent: Spirit Airlines . The budget carrier famous for its sky-high baggage fees was the last U.S. airline to go public, in 2011, according to Dealogic. Since then, that stock is up more than fivefold.

Categories: Transactions

The Streak Is Over: Herbalife Misses Estimates for First Time Since 2008

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 15:55
Bloomberg News

Herbalife Ltd.'s profit streak is over.

The marketer of nutritional supplements reported second-quarter profit that fell short of Wall Street’s expectations, the first time since 2008 that Herbalife missed estimates.

Shares slumped 9.6% in after-hours trading. The stock closed Monday at $67.48, up 2.2% on the day.

The company reported second-quarter earnings on an adjusted basis of $1.55 a share, a penny short of analysts’ expectations. Herbalife also posted quarterly revenue of $1.31 billion.

Analysts polled by Thomson Reuters expected Herbalife to report second-quarter earnings of $1.56 a share on revenue of $1.36 billion.

For the third quarter, Herbalife forecast earnings of adjusted basis between $1.49 and $1.53 a share on revenue up 9% to 11% from a year ago. Analysts expected per-share profit of $1.62 and revenue growth of 11% to $1.34 billion.

Herbalife has been in the cross hairs since late 2012 when billionaire investor Bill Ackman alleged that the company operates a pyramid scheme and that it should be shut down. The company has repeatedly denied those allegations. The latest chapter came last week, when Mr. Ackman gave a lengthy presentation against the company. Instead of delivering the “death blow” he had promise, the presentation pushed Herbalife’s stock up 25%, its biggest one-day gain ever.

The last time Herbalife’s quarterly profit had fallen short of Wall Street’s target was in the fourth-quarter of 2008, when its quarterly earnings-per-share also missed estimates by a penny.

Herbalife shares are down 14% this year through Monday’s close. The stock remains up about 80% since December 2012, when Mr. Ackman publicized his billion-dollar short position against Herbalife.

Herbalife reported a profit of $119.5 million, or $1.31 a share, down from $143.2 million, or $1.34 a share, a year earlier. Excluding expenses incurred to respond to attacks on the company’s business model and a Federal Trade Commission inquiry, convertible note accounting impacts and other items, adjusted earnings rose to $1.55 from $1.41. Revenue increased 7.1% to $1.31 billion.

Herbalife on Monday said it repurchased $581 million or 9.8 million shares in the second quarter, as expected. Herbalife said that there is $232.9 million remaining on its existing $1.5 billion share repurchase authorization.

–Tess Stynes contributed to this report.

Categories: Transactions

Greenhill Reports Lower Profit but Exceeds Expectations

New York Times DealBook - Mon, 07/28/2014 - 15:51
Amid a flurry of large deals worldwide, the boutique investment bank experiences a "relatively quiet" first half in transaction completions.
Categories: Transactions

Do Big Banks Get a Subsidy? GAO Report May Not End Debate.

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 15:19
Bloomberg

A long-awaited report that’s kept Wall Street on edge will be released Thursday, when the Government Accountability Office is expected to reveal whether the nation’s biggest banks enjoy a funding advantage because they are considered “too big to fail”.

It’s almost guaranteed the study won’t settle the issue and will likely give big bank supporters and detractors ammunition in their ongoing fight.

The report was undertaken at the request of Sens. Sherrod Brown (D., Ohio) and David Vitter (R., La.), a bipartisan duo who contend the biggest banks continue to benefit financially from the perception the government would bail them out in the event of a crisis rather than risk their collapse.

The banks, on the other hand, argue any funding advantage they might have enjoyed before the 2008 crisis is gone now.

People on both sides of the debate appear likely to find support for their arguments within the GAO report, based on the competing narratives already emerging from the still-unpublished report.

Some people familiar with the report have indicated it will show that big banks continue to enjoy a subsidy, and while that subsidy has decreased, it has done so for primarily temporary reasons — namely, that the economy and markets are healthier than 2008 and interest rates are near zero. These people said the report will also likely show that if the markets enter another period of severe stress, investors and depositors will race to the megabanks because they know believe regulators will bail out those banks.

Other people around Washington, including industry representatives, say they’ve heard the study provides some good support for the contention that the funding advantage has diminished or disappeared. Rather than trying to calculate a single subsidy number as past reports have done, the GAO report allegedly puts forth dozens of possible ways such a subsidy could be calculated and runs the numbers on each.

The report’s findings have been made public yet, but officials on Capitol Hill and at various agencies around town got a chance to see drafts of it in recent weeks.

Mr. Brown has scheduled a hearing to mark the report’s release Thursday afternoon. He is chairman of the Financial Institutions and Consumer Protection subcommittee of the Senate Banking panel.

Categories: Transactions

Train Reading: The Class of the Class of ’94

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 15:13

Fragile Gaza truce breaks down – WSJ

Ukraine reports heavy fighting around Flight 17 crash site – WSJ

Meet the new Big Blue: FacebookMoneyBeat

China’s financial risk – Econbrowser

The class of the Class of ’94? YahooCorporate Intelligence

Legalize it – New York Times

A musical interlude: Peter Tosh; Legalize ItYouTube

If all the apps in the world stopped working, what would we do? – MathBabe

Categories: Transactions

Herbalife Looks to Make It 22 In a Row

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 14:31
Bloomberg News

Herbalife Ltd. has a streak going that has to make a short seller shudder.

The marketer of nutritional supplements, set to report second-quarter results Monday after the bell, has posted quarterly profits ahead of Wall Street’s expectations in 21 straight quarters, a stretch dating back to 2008. The stock has risen 16 of those 21 times.

Herbalife has been in the cross hairs for years as billionaire investor Bill Ackman has alleged that the company operates a pyramid scheme and that it should be shut down. The company has repeatedly denied those allegations. The latest chapter came last week, when Mr. Ackman pledged to deliver a “death blow” to the company in a lengthy presentation. Instead, the stock responded by rallying 25%, its biggest one-day gain ever.

More In Herbalife

Several investors have speculated that Herbalife’s shares rose so markedly last week mainly due to a so-called short squeeze, where investors were forced to redeem shares they had borrowed on Monday to bet the stock price would drop.

Now the focus shifts to Monday’s results. Analysts polled by Thomson Reuters expect Herbalife to report second-quarter earnings of $1.56 a share on revenue of $1.36 billion. In April, Herbalife raised its full-year earnings guidance.

The last time Herbalife’s quarterly profit fell short of Wall Street’s target was in the fourth-quarter of 2008, when its quarterly earnings-per-share missed estimates by a penny.

Despite last week’s rally, Herbalife shares are still down about 16% for the year. The stock remains up about 80% since December 2012, when Mr. Ackman publicized his billion-dollar short position against Herbalife.

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European Startups Raise Highest Quarterly VC Financing Since 2001

Wall Street Journal MoneyBeat - Mon, 07/28/2014 - 13:56
Not bad Europe, but still a ways to go.

LONDON—European startups have had a bumper few months, raising €2.1 billion (more than $2.8 billion) from venture-capital investors in the second quarter of 2014, the highest quarterly total since 2001, according to data from Dow Jones VentureSource.

The influx of funding into privately held European companies echoes a similar investment boom in the U.S., where private companies raised $13.8 billion in venture capital in the same period, according to Dow Jones Venture Source. And it came at a time when world financial markets rallied in sync, with stocks, bonds and commodities all rising.

“People who wait for the right moment are probably all investing now,” said Michiel Kotting, a partner at Accel Partners, a venture capital firm with offices in London.

Venture capital investors say they are finally seeing more U.S. interest in European companies, after several companies went public with near-billion-dollar valuations, such as French advertising company Criteo , Finnish game maker Supercell and Swedish-Anglo game maker King Digital Entertainment .

Mr. Kotting said that the current environment was different than the dot-com bust in 2000, because funds were making repeated investments in companies and looking for maturity and profits.

“It’s the opposite of the bubble 12 years ago,” he said.

Neil Rimer, of Index Ventures, said the difference between now and the dot-com bust of 2000 was that investors are looking to bet on “legitimate businesses,” not those that vaguely have something to do with the internet for the sake of adding a .com to their portfolio.

“We’re in a very, very fertile market right now and we’re seeing lots of great entrepreneurs who are combining technology and business model innovation to go after big sectors,” Mr. Rimer said.

In Europe, consumer services companies led the way, with online retailers, car-sharing and movie and music distribution companies completing the largest deals. The biggest round of funding was claimed by Russian online retailer Ozon Group, which raised $150 million in April, while the U.K.’s Kobalt Music Group Ltd., which helps musicians collect royalties, raised €84.4 million in June.

Investors say there is more competition among each other for deals, making it more expensive to buy stakes in companies.

Deals are, on average, getting slightly larger. The number of deals fell 6% to 365 in the second quarter of 2014 from 406 in the second quarter of 2013. But the median deal size – the point at which half of deals were worth more and half less – rose to €2.2 million ($2.9 million) from €1.5 million ($2 million).

“It’s clearly easier for companies to raise money,” said Frederic Lardieg, a principal with Octopus Investments.

Activity was strongest in the U.K., where companies raised 28% of the total amount in the second quarter, followed by France with 19% and Germany with 15%.

Index Ventures, which has offices in Geneva, London and San Francisco, was the busiest firm in Europe, with 16 deals completed.

Ozon Chief Executive Maelle Gavet said that when she started talking to investors a year ago, she sensed that they were ready to put their money to work.

“In general, the impression was there was a lot of money around but very little opportunity to invest for all of these investors,” she said. “They were looking for the golden opportunity.”

The online retailer was able to close the $150 million round in June, even amid all the turbulence in Ukraine and when the ruble was volatile.

She said Ozon will plow the money into their warehouses, delivery systems, inventory selection and technology.

 

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