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Holy Shi*! You've Got To Read This Zerohedge Story!


Parsad
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Pardon my French, but as Broxburnboy on a previous post mentioned, Zerohedge has started an extensive story covering the Fairfax suit against the hedge funds.  After reading it, I felt that this thing deserved it's own thread.  Some of the things I had no idea about, that are now being revealed in the release of materials and emails.  

 

A good example is that I had no clue, even after all this time, that SAC Capital had attempted to get Quentin Broad, analyst at CIBC, to initiate reports on Fairfax.  I just touted Broad in another post about how some analysts had stuck to their guns during that period, yet apparently it seems he was contacted by SAC!  Don't know if he was involved in any way, or just refused to initiate coverage.  Wow!  

 

Zerohedge said that this is just the tip of the iceberg that they will cover in this first article!  Cheers!

 

http://www.zerohedge.com/article/fairfax-chronicles-part-1-exposing-sacs-alleged-market-manipulation-and-insider-trading-sche

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http://business.financialpost.com/2011/03/09/reporters-caught-up-in-fairfax-case/

 

"One journalist who may still be deposed is Peter Eavis, a former columnist with The Wall Street Journal. Eavis was served a subpoena by lawyers for Morgan Keegan and Co, another defendant, over columns he wrote about Fairfax when he worked at TheStreet.com."

 

I created a google.com/alert for MRS-L-2032-06 which is the docket number. I hope more news organizations will quote that docket number in the future.

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This has been a long time coming hasn't it? But it seems that the shi* has finally started to hit the fan and the chickens are beginning to come home to roost. Given the number of news articles that have been published in the past few days I think that this story is finally going to start to snowball to the point where it will get the exposure it deserves. The next few weeks could be very interesting.

 

Does anyone know if this case has actually gone to trial or is this just discovery? Or is it done differently in tue US?

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Was I the only person on the planet who saw the brief Maria Bartaroma CNBC interview of Stevie Cohen @ the recent Swiss conference. A coles notes version of the interview Maria There is Steve Cohen head of wall streets most respected hedge fund SAC. Do you have any words of advice for our viewers  Stevie Why would you want to interview me Maria I am on my way down arent I.  End of interview

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Unbelievable..

 

Are there any projections of what the damage claim(s) may be?

 

 

Well the big lawsuit was for $6b.  However, at this point, that's just a gleam in Prem's eye.  First FFH has to win.  Then they have to defend the thousand appeals that the hedgies will try to launch, and then FFH has to actually collect from the deadbeats.  If they actually win and defend all the appeals, maybe, maybe, maybe they'll receive a cheque in 2020 or so.....assuming that these guys still have any visible assets in 2020 (as opposed to offshore money).  And, whatever they collect will be discounted by time value of money (ie, what's the value of a billion that you won't receive until 2020?).

 

So IMO, you're left with:

 

$6b X probability of winning the case X probability of winning the appeals X % of award that is collectible / (1 + r)**10

 

 

Personally, I attach a value of zero to the lawsuit when I try to value FFH.

 

SJ

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And SJ's timeline is probably optimistic and doesn't include the legal fees FFH is incurring.

 

Now don't get me wrong because I fully support this law suit and believe that the legal cost is money well spent. It is a story that needs to be told and if it cost a few dollars in share price then I would gladly contribute my share just for entertainment value alone.

 

Of course there could come a point where a settlement might be reached. However, since this involves a very personal attack on Prem I wouldn't want to bet on a settlement any time soon. This case involves a lot more than money. There are egos and reputations at stake here.

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It's too bad the regulatory agencies are toothless.  I agree with cwericb that this is a story that needs to be told, but I wish we didn't need to spend shareholder money on it.

 

I think because of the Lawsuit, people are/will think  twice before they come after FFH. I think that is money well spent.

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The lawsuit is money well spent as long as it remains reasonable. The truth have to be told to the public and these miscreants need to be punished. I don't have any problem to pay my per share cost of that lawsuit, as long as the legal cost is reasonable.

 

 

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First FFH has to win.  Then they have to defend the thousand appeals that the hedgies will try to launch, and then FFH has to actually collect from the deadbeats.

 

If they win the first round, the hedgies will likely want to settle.  After all, try raising money with such a knock against you.  Imagine the hypothetical conversation with a pension fund.  "Sure we're underhanded liars but we'll look after your money real good...."  Humm, second thought, Madoff seemed to do well with a similar pitch ;)

 

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I think FFH wants to get into the public domain all the material involved with this story as it paints a very poor picture of the hedge funds involved. They are highly secretive and hate bad press. Unfortunately, this is the best one can do in situations like this. FFH understands there is a low probability of collecting cash. 

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Well the big lawsuit was for $6b.  However, at this point, that's just a gleam in Prem's eye.  First FFH has to win.  Then they have to defend the thousand appeals that the hedgies will try to launch, and then FFH has to actually collect from the deadbeats.  If they actually win and defend all the appeals, maybe, maybe, maybe they'll receive a cheque in 2020 or so.....assuming that these guys still have any visible assets in 2020 (as opposed to offshore money).  And, whatever they collect will be discounted by time value of money (ie, what's the value of a billion that you won't receive until 2020?).

 

So IMO, you're left with:

$6b X probability of winning the case X probability of winning the appeals X % of award that is collectible / (1 + r)**10

Personally, I attach a value of zero to the lawsuit when I try to value FFH.

 

SJ

 

I wouldn't disagree about not waiting by the mailbox for a check but didn't the lawsuit include RICO allegations which if upheld would treble the damages to $18 billion? Just to add to your equation.

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I wouldn't disagree about not waiting by the mailbox for a check but didn't the lawsuit include RICO allegations which if upheld would treble the damages to $18 billion? Just to add to your equation.

 

The Overstock suit had RICO charges, but I'm not sure about the Fairfax suit.  Cheers!

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I wouldn't disagree about not waiting by the mailbox for a check but didn't the lawsuit include RICO allegations which if upheld would treble the damages to $18 billion? Just to add to your equation.

 

The Overstock suit had RICO charges, but I'm not sure about the Fairfax suit.  Cheers!

 

 

Fairfax is indeed a RICO action too.

 

http://www.fairfax.ca/Assets/Downloads/Press/fpr2006-07-26.pdf

 

 

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The Fairfax suit does include RICO allegations and a request for treble damages.  So the maximum potential damages number would be $18 billion + interest.  But that is just a number plugged into the complaint.  By now, Fairfax has likely submitted expert reports that quantify its actual claimed damages based on the evidence.  Though I don't know any of the facts, I doubt it is $6 billion -- that's awfully high for a company that had around a $4 billion market cap at the time.  But even if Fairfax can show actual damages of, say, $1 billion (with potential x3) that is an enormous claim.

 

 

 

 

 

 

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