Wall Street Folly

AAAAaaargh!: Pirate Capital says the press reports about their shrinking asset base are “grossly misleading”

Posted by WSF On September - 14 - 2007

PirateCapitalSinkingShipLogoHudson-002

Pirate Capital put out a statement saying that the press has been publishing "grossly misleading information" about their shrinking funds:

Pirate Capital issued the following statement today:

Various media have published grossly misleading information regarding results at funds managed by Pirate Capital. Some reports have suggested that Pirate funds lost almost 80 percent of their value in the past year. In fact, while assets under management have decreased, average returns over Pirate’s four funds during the last year are about plus 4 percent.

Pirate Capital remains committed to its event-driven strategy to create value for its investors.

We love the squishy language he uses above — it makes us even more skeptical. "Average returns"? Everybody knows there are lots of ways to calculate averages so that’s not very helpful. Not a very convincing or effective spin job. If the assets under management haven’t "decreased" by 80% why doesn’t Tom Hudson just set the record straight and come clean the way so many others have about their results? Absent that, the rumors will continue to swirl.

We know we’re not the only skeptics out there. Some of our buddies, who know him very well from his Goldman days (and admittedly don’t like him very much), aren’t impressed. They say that he’s been known to spin a tale or two to protect his butt. Sounds like nothing’s changed. We eagerly await real numbers.

Pirate Capital, taking on water, halts withdrawals from two funds

Posted by WSF On September - 12 - 2007

Sinking ship: With its assets dwindling more with each successive report — down some 80% on the year so far from $1.8 billion to $375 million on 9/1 — Pirate Capital’s loutish captain Tom Hudson has announced to its investors that it’s halting withdrawals from its two Jolly Roger Activist funds. Opened in 2006 with $150 million, the two funds are now down to $100 million, losing 1% through June 30. The halt doesn’t apply to the two larger funds, at least not yet.

With so much bad publicity over the past year from the nasty staff mutiny where half of his crew disembarked to start their own fund, the asset withdrawals as well as rumors about his personal life, we’re betting that the old Pirate isn’t long for this world. With that in mind, we’ve taken the liberty of redesigning their logo with a ship that’s listing perilously because we’re guessing that they’re heading for the briny deep…..

Pirate designated the four stocks held by the funds as “special investments,” meaning that clients won’t be able to get money back until they are sold, according to an Aug. 31 letter to investors.

“In view of the activist nature of the funds, prior redemptions, market turmoil and their effect on the funds’ individual positions and portfolios as a whole, we determined that the best way to manage the positions is through the Special Investment designation,” Hudson said in the letter, a copy of which was obtained by Bloomberg News. The firm may also lift the designation without selling the stocks.

Taking on water: Pirate Capital’s capital sinks to around $400 million

Posted by WSF On July - 19 - 2007

PirateCapital-002

Pirate Capital is taking on water and clients are abandoning ship — fast. The most recent Hedge Fund Alert reports that the capital under management is reportedly down to around only $400 million owing to recent investor withdrawals. Pirate and its brutish founder, Tom Hudson, managed $1.9 billion in assets in the summer of 2006 according to a report that we read in Absolute Return magazine in June, started 2007 with $1.03 billion, was down to $761 million as of May 1, and managed $739 million as of April 1, which at the time was its lowest asset base since July 2005.

Client Concentration Risk was the latest to pull its funds, bringing them down to around $400 million. Last month, Julius Baer controlled fund of funds manager GAM pulled as much as $300 million.

This is only the latest setback for Pirate, where employees staged a mutiny last year and half of them bailed.

More WSF notes on Pirate Capital here.

Pirate Capital investors bailing

Posted by WSF On June - 18 - 2007

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The June edition of Absolute Return magazine is reporting that investors are bailing on Pirate Capital. The fund’s assets, which started the year at $1.03 billion drooped to $761 million on May 1, up slightly from $739 million in April which was the lowest asset base since July 2005. That’s down from its peak of nearly $1.9 million in the summer of 2006.

AR reported that most of the decline came from the firm’s flagship Jolly Roger Fund offshore fund, where assets declined from $775 million at the beginning of 2007 to $514 million as of May 1. The Jolly Roger onshore fund was up 10.4% as of April 30. The offshore fund was up only 1.69% over the same period.

Pirate Capital alums banding together in a new hedge fund

Posted by WSF On January - 8 - 2007

AndrewStotlandZacharyGeorge-001 There’s life after Pirate Capital for three mateys who jumped ship in the mutiny last September and another who left a month earlier. Financial News reports that two of the analysts formerly with the fund, Zachary George (pictured near left) and David Lorber, as well as portolio manager Carl Klein have joined FrontFour Capital Management, a firm founded by another Pirate Capital alum, Andrew Stotland (pictured far left). It’s expected to launch in the next few months. Stotland formerly was the senior director of sales and marketing and raised most of Pirates capital. Seed funding is coming from Weston Atlas Partners.

Former Pirate traders join new hedge fund – Financial News

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Hot off the SEC presses: Pirate Capital goes after Brink’s board representation

Posted by WSF On January - 4 - 2007

PirateCapital-002 Just filed with the SEC, Pirate Capital is nominating two of its own to the Brink’s board of directors: Tom Hudson, the hedge fund’s founder and Christopher Kelly, its General Counsel. Here’s the letter to the Brink’s board:

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Jim Cramer: “Pirate Capital is like a giant sell flag over the horizon”

Posted by WSF On December - 5 - 2006

Last night Jim Cramer dumped all over Pirate Capital in a segment devoted to them on "Mad Money". Here are some screen shots of the show that we snapped. We suspect you’ll get the general gist from the captions on the shots.

Tags: Jim Cramer, Pirate Capital

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Brinks 13d filing: Looks like it’s back to business as usual at Pirate Capital

Posted by WSF On November - 21 - 2006

The folks at Pirate Capital seem to have put the turbulence behind them from a couple of months ago when half of their analytical staff quit. They’ve put their activist pirate hats back on and want security services provider Brinks to, among other things, explore a sale of the company. Pirate owns 8.5% of Brinks. In a 13d filing from today:

On November 21, 2006, Pirate Capital sent a letter to the board of directors of
the Issuer (the "Letter"), among other things, encouraging the board to (i) take
immediate steps to unlock long-term shareholder value by retaining an investment
bank to explore the sale of the Company and initiate a large Dutch tender offer
for the Shares, and (ii) immediately appoint Thomas R. Hudson Jr. to the board.

Brinks had no comment: "We’ve just gotten the letter from Pirate today, so we really don’t have any comment right now," said Brink’s spokesman Edward Cunningham.

In other news, Pirate has upped its stake in Pep Boys from 9.4% to 11.3%. Tom Hudson, founder of Pirate Capital, is on the company’s board of directors.

Pirate Capital says Brink’s should explore sale – Reuters

Pirate Capital raises stake in Pep Boys – Reuters

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OSI Restaurants: Pirate Capital’s abandoned target gets bought out

Posted by WSF On November - 6 - 2006

Last Spring, in the days before half of its analytical staff abandoned ship, activist hedge fund Pirate Capital, headed by Tom Hudson, bought up 5.3% of OSI Restaurant Partners at prices from $39 to slightly over $42. He urged the company to spin off some of its restaurant businesses. Over the ensuing months the stock price dropped with Pirate bailing in August at prices ranging from $27.59 to $29.37. Today OSI agreed to be bought out at $40. Ouch.

Pirate Capital misses out on Outback buyout – MarketWatch

No Pirates on Cutter & Buck Board

Posted by WSF On October - 19 - 2006

Pirate Capital, which owns 13% of Seattle based company Cutter & Buck, won’t have the board seat that it was trying to get any time soon David Lorber, one of the five Pirate staffers who jumped ship last month, was nominated for Cutter’s board, but he withdrew his nomination. At today’s annual meeting, Cutter is going ahead with a vote on the remaining seven nominees, with no one replacing Pirate’s candidate.

Pirate Capital may lose control of two board seats

Posted by WSF On October - 13 - 2006

With the sudden departure of Matthew Goldfarb last month, one of the employees who jumped ship in the mass exodus, Pirate Capital might lose control of two of the board seats that it fought for:

Pirate publicly disclosed in its filing that analyst Matthew Goldfarb, who sits on the boards of CKE Restaurants Inc. (CKR.N: Quote, Profile, Research) and James River Coal Co. (JRCC.O: Quote, Profile, Research), was among the staff that had resigned from the hedge fund. It did not add further details.

Pirate Capital cancels conference call to have one-on-ones instead

Posted by WSF On October - 2 - 2006

Pirate Capital was supposed to be holding a conference call for investors on October 3. According to Reuters, fearing that unauthorized people might try to hop on the call, it’s cancelled it in favor of having one-on-one meetings instead.

The call cancellation comes amid concern that Pirate, a $1.7 billion fund, may be faced with increased investor redemption demands after disclosing this week that five investment professionals would leave the firm.

One person with knowledge of the firm said the departures were largely about compensation, not about any SEC issues.

The firm in previous years had produced large returns, but some of the investment staff didn’t feel adequately compensated for their work, this source said. This year, however, the firm’s returns are lower than previous years, and some staff felt they would get even less 2006 compensation, the source said…..

The sources said the firm isn’t likely to face a huge meltdown, as in Amaranth Advisors LLC, which lost some $6 billion in wrong-way commodity trades this month. But Pirate may have to sell some positions to pay any investor redemption demands in coming months, these people said.

Pirate Capital cancels Oct 3 investor call-sources – Reuters

On the offensive: Pirate lifts stake in PW Eagle

Posted by WSF On September - 29 - 2006

Things are getting done even through the turmoil at Pirate Capital. Today they filed an amended 13D for PW Eagle and now own a 22.5% stake, up from 20.5% on August 31 — with purchases made through yesterday.

In August, Pirate Capital entered into a Rule 10b5-1 trading plan with regard to PW Eagle’s common shares. The trading plan is effective until Feb. 22, 2007, and provides for the purchase of up to $30 million of PW Eagle’s common shares.

Shares of PW Eagle closed Thursday at $28.98 each.

In May, it was reported that Pirate Capital had notified PW Eagle of its intention to acquire more than 20% of the company’s voting shares and that it might buy additional shares, enabling it to hold more than 33.3% of the shares entitled to vote.

In late May, PW Eagle’s shareholders elected seven new directors, boosting the board’s membership from five, and the board formed a strategic committee to look into the potential sale of the company.

Some of Pirate Capital’s departees may take legal action; Meet the pirates

Posted by WSF On September - 29 - 2006

A dispute is brewing over the characterization of the departure of some of the Pirate Capital staffers, and litigation might be brewing:

Pirate founder Thomas Hudson, in a letter sent today to investors, didn’t say what led to the departures. He’ll close the Norwalk, Connecticut-based firm’s funds to new investments, and concentrate on managing money rather than courting clients and overseeing his staff, according to the letter.

“My goal is to focus on returns, not the size of the assets we manage,” he wrote.

The letter said analysts Zachary George and David Lorber resigned on Sept. 26, and Carl Klein, the firm’s fixed-income portfolio manager, quit the next day. Hudson then fired analysts David Muccia and Matthew Goldfarb, the letter said. All will leave after a 30-day transition.

“What Hudson wrote in the letter to investors is a blatant mischaracterization of the circumstances of our departure,” Goldfarb and Muccia said during a phone call this evening. “We are currently exploring appropriate legal remedies.”

Meet the current and former pirates: We did some research on the departees and those who remain, and here’s what we pieced together:

Pirate Capital Headline Roundup

Posted by WSF On September - 29 - 2006

Pirate Capital’s Hudson Says He’s Determined to Improve Returns
Pirate Capital loses staff after returns slip
Hedge Fund Shrinks Staff and Faces S.E.C. Inquiry

Pirate Capital now has five fewer pirates

Posted by WSF On September - 28 - 2006

Pirateship01 Wow. We go out for a couple of hours and come back to yet another hedge fund with major issues. Half of Pirate Capital’s staff jumped ship and the fund is now closed to new investors. Tom Hudson, the firm’s founder says that he’s not liquidating positions or shutting down the firm.

Pirate Capital LLC said five of its ten investment professionals resigned and it will close its funds to new investments, according to a letter to investors.

Pirate, which oversees $1.7 billion, didn’t say why the staffers were leaving the firm after a 30-day transition period.

Thomas Hudson, founder of the Norwalk, Connecticut-based firm, declined to comment by e-mail when contacted by Bloomberg News. He’s built a reputation as an activist investor by taking stakes in companies and pressuring them for changes to boost their stock prices.