SAC Capital Partners
Encyclopedia
SAC Capital Advisors is a $14 billion dollar group of hedge fund
s founded by Steven A. Cohen
in 1992. The firm employs approximately 800 people across its offices located in Stamford
, Connecticut
and New York City
with international satellite offices. In 2010, the SEC opened an investigation into insider trading at SAC.
Forbes listed SAC founder Steven Cohen's estimated net worth to be $8.0 billion as of 2008.
across four independent portfolios, each with distinct mandates.. Although larger multistrategy funds exist, in absolute terms SAC's long-short strategies and capital flow make it an influential price-setting hedge fund in equities. The company has branched out into alternative investment
strategies including private equity
and emerging markets
through expansion.
According to Bloomberg BusinessWeek magazine, SAC Capital Advisors routinely accounts for as much as 3% of the New York Stock Exchange
's average daily trading, plus up to 1% of the NASDAQ
's—a total of at least 20 million shares a day. Average trading volume rivals Fidelity Investments
and Capital Research and Management. The fund is widely known to pay brokers the highest commissions of any equities-focused investment group. In addition to the firm's numerous short-term trades, SAC reportedly has a considerable longer-term stake in Google
and search engine Baidu
, controlling 19.5% as of 2006.
and 20% to 30% of the annual returns, SAC keeps 3% and 50%—the highest in the industry. Favored industries for the fund include healthcare, followed by high technology, industrials and retail/consumer goods. SAC has also been very active in financial sector equities over the last decade, with a number of traders focused on the financial sector exclusively.
, British West Indies
, and its trading offices are located in Stamford
, Connecticut
and New York City
. SAC also maintains satellite offices in San Francisco, Hong Kong
, Boston
, and London
. The firm employs approximately 800 people, of which about 150 are investment personnel and 20 are staffed in legal and compliance.
reported on a lawsuit against SAC and Camelback (now known as Gradient Analytics
) by Biovail
, a Canadian pharmaceutical company. According to the report, in the spring of 2003 SAC asked Camelback, an Arizona
stock analysis firm, for a report on Biovail. Former Camelback employees alleged that SAC had determined the content and timing of their reports on Biovail in order to drive the price of the stock down. Camelback said the former employees were lying and disgruntled and had been fired for poor performance and unethical conduct, and that it had already written a negative report on Biovail that pre-dated the alleged conspiracy. In the following six months, Biovail’s stock fell 50 percent; however, the company issued two disappointing earnings statements. Biovail CEO Eugene Melnyk
insists it was the Camelback reports that triggered the sell-off.
The CBS report also noted that ten years previously Melnyk had sued another hedge fund, accusing it of spreading rumors about his stock in order to sell it short. SAC denied all the charges and said that the stock was overvalued and that the decline was due to earnings shortfalls and regulatory investigations. In March, 2008, the U.S. Securities and Exchange Commission sued Biovail and some of its former officers, for accounting fraud, particularly that "Biovail actively misled investors and analysts about the reasons for the company's poor performance". Biovail settled for $10 million.
On February 19, 2009, Judge Stanley R. Chesler of the United States District Court for the District of New Jersey
dismissed the claims of shareholders, writing:
“… the factual allegations of the Amended Complaint have a tainted origin and, as events following its filing confirm, are incompatible with Biovail’s admission of guilt in a kickback scheme that the Amended Complaint accuses Defendants of falsely reporting and with Biovail’s admissions, in connection with the settlement of the SEC enforcement action, of making false statements that inflated its stock price.”
On August 20, 2009, New Jersey Superior Court Judge Donald Goldman dismissed all of Biovail's claims against SAC Capital. The judge ruled that Biovail and its attorneys launched a choreographed strategy designed to constitute a counterattack against Biovail's stock action, and that its attorneys "ignored their professional and ethical obligations and aided Biovail for their own benefit."
On February 10, 2010, SAC Capital filed a lawsuit in federal court in Connecticut seeking damages from Biovail for filing "vexatious" litigation against SAC in 2006.
On November 4, 2010, SAC Capital and Valeant Pharmaceuticals International
, which merged with Biovail in June 2010, announced that they had agreed to settle the lawsuit. Under the settlement, Valeant paid $10 million to SAC. Valeant’s chief executive officer, J. Michael Pearson, said, “The initiation of litigation against SAC and others in 2006 by Biovail’s management at the time was regrettable…We would like to put this incident behind us.”
Ltd (FFH) of conspiring to manipulate the company's stock price. FFH alleged SAC Capital and other two hedge funds paid John Gywnn and his employer Morgan Keegan to publish negative reports on FFH, while the funds shorted FFH's stock. In December 2008, Fairfax Financial Holding provided evidence to the court of email exchanges among the hedge funds and the analyst, John Gywnn, discussing the content of the soon to published report on FFH.
On September 14, 2011, the Superior Court in Morris County, New Jersey, granted SAC Capital Advisors’ motion for summary judgment and removed SAC Capital Advisors, Sigma Capital Management, a division of SAC Capital Advisors and Steven Cohen as defendants from the case. The judge noted that SAC Capital Advisors largely owned positions that would profit from a rise – not a drop – in the share price of Fairfax, undermining the very basis for the suit.
In his 32-page opinion, Judge Hansbury noted that: “It does not make sense that the alleged leader of the conspiracy would not only NOT act as its alleged cohorts did, but in fact, stand to lose money as a result of the alleged conspiracy. There is no direct evidence of any sort of conspiracy involving SAC to take down Fairfax, and any allegation of such, is too much speculation based on circumstantial evidence to get past summary judgment.”
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s founded by Steven A. Cohen
Steven A. Cohen
Steven "Steve" A. Cohen is an American hedge fund manager. He is the founder of SAC Capital Advisors, a Stamford, Connecticut-based hedge fund focusing primarily on equity market strategies....
in 1992. The firm employs approximately 800 people across its offices located in Stamford
Stamford, Connecticut
Stamford is a city in Fairfield County, Connecticut, United States. According to the 2010 census, the population of the city is 122,643, making it the fourth largest city in the state and the eighth largest city in New England...
, Connecticut
Connecticut
Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately...
and New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
with international satellite offices. In 2010, the SEC opened an investigation into insider trading at SAC.
Forbes listed SAC founder Steven Cohen's estimated net worth to be $8.0 billion as of 2008.
Investments
The group manages $14 billion in assetsAssets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
across four independent portfolios, each with distinct mandates.. Although larger multistrategy funds exist, in absolute terms SAC's long-short strategies and capital flow make it an influential price-setting hedge fund in equities. The company has branched out into alternative investment
Alternative investment
An alternative investment is an investment product other than the traditional investments of stocks, bonds, cash, or property. The term is a relatively loose one and includes tangible assets such as art, wine, antiques, coins, or stamps and some financial assets such as commodities, private equity,...
strategies including private equity
Private equity
Private equity, in finance, is an asset class consisting of equity securities in operating companies that are not publicly traded on a stock exchange....
and emerging markets
Emerging markets
Emerging markets are nations with social or business activity in the process of rapid growth and industrialization. Based on data from 2006, there are around 28 emerging markets in the world . The economies of China and India are considered to be the largest...
through expansion.
According to Bloomberg BusinessWeek magazine, SAC Capital Advisors routinely accounts for as much as 3% of the New York Stock Exchange
New York Stock Exchange
The New York Stock Exchange is a stock exchange located at 11 Wall Street in Lower Manhattan, New York City, USA. It is by far the world's largest stock exchange by market capitalization of its listed companies at 13.39 trillion as of Dec 2010...
's average daily trading, plus up to 1% of the NASDAQ
NASDAQ
The NASDAQ Stock Market, also known as the NASDAQ, is an American stock exchange. "NASDAQ" originally stood for "National Association of Securities Dealers Automated Quotations". It is the second-largest stock exchange by market capitalization in the world, after the New York Stock Exchange. As of...
's—a total of at least 20 million shares a day. Average trading volume rivals Fidelity Investments
Fidelity Investments
FMR LLC or Fidelity Investments is an American multinational financial services corporation one of the largest mutual fund and financial services groups in the world. It was founded in 1946 and serves North American investors. Fidelity Ventures is its venture capital arm...
and Capital Research and Management. The fund is widely known to pay brokers the highest commissions of any equities-focused investment group. In addition to the firm's numerous short-term trades, SAC reportedly has a considerable longer-term stake in Google
Google
Google Inc. is an American multinational public corporation invested in Internet search, cloud computing, and advertising technologies. Google hosts and develops a number of Internet-based services and products, and generates profit primarily from advertising through its AdWords program...
and search engine Baidu
Baidu
Baidu, Inc. , simply known as Baidu and incorporated on January 18, 2000, is a Chinese web services company headquartered in the Baidu Campus in Haidian District, Beijing, People's Republic of China....
, controlling 19.5% as of 2006.
Management Fees
While most hedge funds charge a management fee of 2% of AUMAssets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
and 20% to 30% of the annual returns, SAC keeps 3% and 50%—the highest in the industry. Favored industries for the fund include healthcare, followed by high technology, industrials and retail/consumer goods. SAC has also been very active in financial sector equities over the last decade, with a number of traders focused on the financial sector exclusively.
History
Former traders and rivals say one way Cohen built his business and relationships with brokers was by buying secondary offerings, when public companies decide to bring more shares to market, on which brokers receive around 40 cent to $2 a share on a built-in sales commission. "If you take down a million shares of a secondary, you've just paid your broker $1.5 million," says a fund manager. "That's how Stevie started off paying the Street."Corporate affairs
The company is incorporated offshore in AnguillaAnguilla
Anguilla is a British overseas territory and overseas territory of the European Union in the Caribbean. It is one of the most northerly of the Leeward Islands in the Lesser Antilles, lying east of Puerto Rico and the Virgin Islands and directly north of Saint Martin...
, British West Indies
British West Indies
The British West Indies was a term used to describe the islands in and around the Caribbean that were part of the British Empire The term was sometimes used to include British Honduras and British Guiana, even though these territories are not geographically part of the Caribbean...
, and its trading offices are located in Stamford
Stamford, Connecticut
Stamford is a city in Fairfield County, Connecticut, United States. According to the 2010 census, the population of the city is 122,643, making it the fourth largest city in the state and the eighth largest city in New England...
, Connecticut
Connecticut
Connecticut is a state in the New England region of the northeastern United States. It is bordered by Rhode Island to the east, Massachusetts to the north, and the state of New York to the west and the south .Connecticut is named for the Connecticut River, the major U.S. river that approximately...
and New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
. SAC also maintains satellite offices in San Francisco, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
, and London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
. The firm employs approximately 800 people, of which about 150 are investment personnel and 20 are staffed in legal and compliance.
Biovail
In March 2006, 60 Minutes60 Minutes
60 Minutes is an American television news magazine, which has run on CBS since 1968. The program was created by producer Don Hewitt who set it apart by using a unique style of reporter-centered investigation....
reported on a lawsuit against SAC and Camelback (now known as Gradient Analytics
Gradient Analytics
Gradient Analytics, Inc., founded in 1996 by Donn Vickrey and Dr. Carr Bettis as Camelback Research Alliance, Inc. and based in Scottsdale, Arizona, is an independent equity research company.-External links:...
) by Biovail
Biovail
Biovail Corporation was a Canadian pharmaceutical company, operating internationally in all aspects of pharmaceutical products. Its major production facility was located in Steinbach, Manitoba...
, a Canadian pharmaceutical company. According to the report, in the spring of 2003 SAC asked Camelback, an Arizona
Arizona
Arizona ; is a state located in the southwestern region of the United States. It is also part of the western United States and the mountain west. The capital and largest city is Phoenix...
stock analysis firm, for a report on Biovail. Former Camelback employees alleged that SAC had determined the content and timing of their reports on Biovail in order to drive the price of the stock down. Camelback said the former employees were lying and disgruntled and had been fired for poor performance and unethical conduct, and that it had already written a negative report on Biovail that pre-dated the alleged conspiracy. In the following six months, Biovail’s stock fell 50 percent; however, the company issued two disappointing earnings statements. Biovail CEO Eugene Melnyk
Eugene Melnyk
Eugene Melnyk is a Ukrainian Canadian businessman who now resides in Barbados. He is the current owner, governor, and chairman of the Ottawa Senators professional ice hockey club of the National Hockey League . He also owns the Mississauga St. Michael's Majors junior-age ice hockey club...
insists it was the Camelback reports that triggered the sell-off.
The CBS report also noted that ten years previously Melnyk had sued another hedge fund, accusing it of spreading rumors about his stock in order to sell it short. SAC denied all the charges and said that the stock was overvalued and that the decline was due to earnings shortfalls and regulatory investigations. In March, 2008, the U.S. Securities and Exchange Commission sued Biovail and some of its former officers, for accounting fraud, particularly that "Biovail actively misled investors and analysts about the reasons for the company's poor performance". Biovail settled for $10 million.
On February 19, 2009, Judge Stanley R. Chesler of the United States District Court for the District of New Jersey
United States District Court for the District of New Jersey
The United States District Court for the District of New Jersey is the federal district court whose jurisdiction is the state of New Jersey....
dismissed the claims of shareholders, writing:
“… the factual allegations of the Amended Complaint have a tainted origin and, as events following its filing confirm, are incompatible with Biovail’s admission of guilt in a kickback scheme that the Amended Complaint accuses Defendants of falsely reporting and with Biovail’s admissions, in connection with the settlement of the SEC enforcement action, of making false statements that inflated its stock price.”
On August 20, 2009, New Jersey Superior Court Judge Donald Goldman dismissed all of Biovail's claims against SAC Capital. The judge ruled that Biovail and its attorneys launched a choreographed strategy designed to constitute a counterattack against Biovail's stock action, and that its attorneys "ignored their professional and ethical obligations and aided Biovail for their own benefit."
On February 10, 2010, SAC Capital filed a lawsuit in federal court in Connecticut seeking damages from Biovail for filing "vexatious" litigation against SAC in 2006.
On November 4, 2010, SAC Capital and Valeant Pharmaceuticals International
Valeant Pharmaceuticals International
Valeant Pharmaceuticals International, Inc. is a pharmaceutical company with activities spanning the drug discovery pipeline from target identification through clinical trials and commercialization. The focus of the company is on neurology, dermatology and infectious disease with several drugs in...
, which merged with Biovail in June 2010, announced that they had agreed to settle the lawsuit. Under the settlement, Valeant paid $10 million to SAC. Valeant’s chief executive officer, J. Michael Pearson, said, “The initiation of litigation against SAC and others in 2006 by Biovail’s management at the time was regrettable…We would like to put this incident behind us.”
Fairfax Financial Holdings
In July 2006, Steven Cohen's SAC Capital Advisors, Jim Chanos' Kynikos Associates, Dan Loeb's Third Point LLC, and former Morgan Keegan analyst John Gywnn were sued by Fairfax Financial HoldingsFairfax Financial Holdings
Fairfax Financial Holdings Limited is a financial holding company based in Toronto, Ontario, which is engaged in property, casualty, and life insurance and reinsurance, investment management, and insurance claims management...
Ltd (FFH) of conspiring to manipulate the company's stock price. FFH alleged SAC Capital and other two hedge funds paid John Gywnn and his employer Morgan Keegan to publish negative reports on FFH, while the funds shorted FFH's stock. In December 2008, Fairfax Financial Holding provided evidence to the court of email exchanges among the hedge funds and the analyst, John Gywnn, discussing the content of the soon to published report on FFH.
On September 14, 2011, the Superior Court in Morris County, New Jersey, granted SAC Capital Advisors’ motion for summary judgment and removed SAC Capital Advisors, Sigma Capital Management, a division of SAC Capital Advisors and Steven Cohen as defendants from the case. The judge noted that SAC Capital Advisors largely owned positions that would profit from a rise – not a drop – in the share price of Fairfax, undermining the very basis for the suit.
In his 32-page opinion, Judge Hansbury noted that: “It does not make sense that the alleged leader of the conspiracy would not only NOT act as its alleged cohorts did, but in fact, stand to lose money as a result of the alleged conspiracy. There is no direct evidence of any sort of conspiracy involving SAC to take down Fairfax, and any allegation of such, is too much speculation based on circumstantial evidence to get past summary judgment.”