Galleon rivals look to profit as hedge fund sinks
Filed under: Company News, Investing, Google , Apple
As federal investigators expand their allegations of insider trading centered on tech hedge-fund giant the Galleon Group, rivals are already looking to take advantage of the firm's desperation. Galleon cofounder Raj Rajaratnam told the firm's employees that he was innocent and would fight all charges, according to The Wall Street Journal, but many investors won't stick around for a trial. Galleon is seeing withdrawal requests of $1.3 billion from a total of $3.7 billion under management, the Journal reports. Some rival hedge-fund managers already appear to be aggressively courting Galleon clients. "Look, that money has to go somewhere," a senior hedge fund manager told The Business Insider blog. "So we're working to make sure we get a huge portion of it."
As Galleon's traders update their resumes, the stock positions that the fund might be forced to liquidate if it unwinds are also taking center stage. Some blogs have listed Galleon's top holdings, with less liquid, smaller cap names like OSI Pharmaceuticals (OSIP), Huron Consulting (HURN), and Anadigics (ANAD) drawing particular scrutiny. The fund also counts high-profile tech names like Google (GOOG), Apple (AAPL) and eBay (EBAY) among big holdings.
But how much notice investors need to give Galleon for withdrawing their money remains unclear. Investors can take money out of Galleon's $350 million tech fund on a monthly basis, for example, but can only withdraw it every quarter with a 45-day notice period from its $1.2 billion Diversified fund, according to reports. Such withdrawal delays may buffet the share price of Galleon holdings, which have yet to demonstrate any overwhelming selling pressure.
Last week, investigators charged Rajaratnam with orchestrating an insider-trading scheme that included executives at tech stalwarts like Intel and IBM. Rajaratnam is accused of booking profits of about $20 million by receiving tips about market-moving information like earnings shortfalls and pending acquisitions in stocks of companies including Google and Hilton (HLNQ).
Free on a $100 million bail, Rajaratnam told employees on Monday morning that he was counting on them to "take care of our investors."
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Reader Comments (Page 1 of 1)
10-20-2009 @ 6:09PM
george said...
That's why the little guy must stay out of the day to day trading and focus on diversification, quality and long term gains. Remember after the fact we're all geniuses.
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10-20-2009 @ 11:10PM
laiconna said...
I'm amazed that people are still getting caught in the insider trading trap. You would think they would know better by now. I guess greed over rules common sense.
www.nubianesse.com
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10-21-2009 @ 12:53AM
KP said...
What is the exact definition of insider trading? Raj may base his defense on that question. Was the data he received from his informants really actual information or just rumors or opinions based on the skuttlebutt inside the targeted corporations? The current list of defendants appears not to include the major players in the performance of their official duties with direct knowledge of non-public information of those businesses he made a small fortune from. It's not clear whether Galleon or just Raj and his co-conspirators benefited from these questionable transactions. Let's hope it's the latter and thereby removing any possibility of Galleon as a corporation being fined by the SEC and Feds for untoward business practices.
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10-21-2009 @ 9:51AM
dang1067 said...
Look at that guy, he's so fvcking ugly and fat, he reminds me of that Jaba the Hut...
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10-21-2009 @ 11:36AM
Mike said...
OK - first of all this is a hedge fund. Joe Middleclass isn't even allowed to buy shares in a hedge fund. You have to have a net worth of over a million and an annual income of over $200k for three years running to play in this league. Second, a huge basis of hedge fund operation is the ability of fund managers to get what would in regular contexts be considered "insider" information. Seems a little odd to me that suddenly the SEC is digging into this. The fact that 1.3B out of 3.7B is being taken out of Galleon in a day or two is an example of the sort of knee-jerk reactions that cause the market to crash. If you had money in that fund and you are so sure that Raj is going to jail that you want your money out now, maybe you shouldn't have put your money in there to begin with.
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