The Morning Brief: Marcato Scores Big With Newest Target

February 10, 2017   Stephen Taub


Shares of Deckers jumped another 6.6 percent, to close at $52.28, bringing its two-day gain to more than 16 percent following Marcato Capital Management’s disclosure that it owns 6 percent of the stock. The footwear maker also becomes the newest activist target of the San Francisco hedge fund firm headed by Mick McGuire III. It is also the latest example of an activist carefully not telegraphing a future activist position.

Marcato did not own any shares of the company as of the third quarter, the last period for which an equity investor was required to publicly disclose their quarterly positions. The fourth-quarter report is due to be filed by Tuesday, February 14. But even that filing wouldn’t make a difference. Marcato disclosed in its 13D filing it bought its entire stake of roughly 1.9 million shares during the first week of February.

In its regulatory filing, Marcato does not lay out specific suggestions or plans for Deckers. Rather, it just uses standard boiler-plate language to say the stock is cheap and it intends to speak with management and the board of directors. Stay tuned for this one.

Marcato earlier this week nominated four people to the board of Buffalo Wild Wings, including McGuire.

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Blackstone Group has raised $1.5 billion for a new fund that will seed new hedge funds, according to Bloomberg. Strategic Alliance Fund III is much smaller than its predecessor fund, which raised $2.4 billion in 2011, according to the report. One potential challenge: If President Trump and Congress scrap the Dodd-Frank law and the Volcker Rule, the big investment banks will no doubt re-create their proprietary trading desks, which will directly compete with hedge funds and the overall talent pool.

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Omega Advisors’ Leon Cooperman, who has been charged with engaging in illegal insider trading violations and other securities violations by the Securities and Exchange, has invoked his Fifth Amendment right in his dealings with the regulator. The reason: he did not want to incriminate himself since he faces a parallel criminal investigation, according to Bloomberg. As we reported earlier, this was precisely the reason why many lawyers believe Cooperman won’t testify in his own defense when his civil trial with the SEC gets underway, probably later this year. Bloomberg reports that word about Cooperman’s decision not to testify on his behalf came up during a hearing on Tuesday in a Philadelphia federal court, when his lawyer tried to get the case thrown out. "He made clear he wanted to testify, but for my advice that there was a parallel case," Cooperman’s lawyer Ted Wells reportedly said in court.

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Rail-Splitter Capital Management cut the value of its U.S. stock portfolio to $134 million at the end of the fourth quarter, from $358 million the previous quarter. The Rail-Splitter Fund fell more than 3 percent in the fourth quarter, bringing its loss for the year to about 13 percent. This followed low single-digits returns in each of the two previous years. Rail-Splitter was founded by John Croghan, a founder and former chairman of Lincoln Capital Management, a long-only investment management firm, and Richard Fradin, a former principal at William Blair & Co.


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