Elliott Management, this fund that has been shaking states and multinationals for 45 years

(BFM Bourse) – Founded in 1977, Elliott Management is one of the oldest “alternative investment funds” in the world. For 45 years, the Paul Singer-led fund has ruthlessly battled heavily indebted states, failed companies or, more recently, institutions like the London Metal Exchange. Elliott Management claims more than 456 million dollars and intends to bend the London institution with the support of the courts, according to its modus operandi.

Eliott Management has taken legal action against the London Metal Exchange (LME). The activist fund accuses the London institution of having canceled transactions amid the chaos in the nickel market on March 8, 11 days after the outbreak of the conflict between Ukraine and Russia. In fact, nickel prices have soared since the start of the conflict due to Russia’s importance in the production of the silvery-white metal.

But on March 8, the price of the metal essential for the production of batteries for electric cars soared to more than $100.00 from $20,000 in early 2022. Faced with runaway prices, speculators who had bet on a drop Silver- The white metal was quick to liquidate its positions by buying futures contracts. Including Chinese nickel giant Tsingshan. Other investors who have also bet on falling nickel prices are canceling their bets, amplifying the panic on board and the price rally. To put out the fire, the LME made use of its short circuit and simply canceled the orders placed between March 7 and 8, arguing that it was its duty to act to avoid the bankruptcy of certain investors.

Elliott Management is insensitive to the argument presented by the London Metal Exchange. The activist fund founded by Paul Singer claims more than 450 million dollars in damages for having used an illegal method to disrupt trade.

The two-faced savior

The hedge fund is not on your first try. Known for its aggressive and habitual approach to legal proceedings, Elliott Management, named after its founder’s middle name, is feared by market participants. Elliott Management’s method is simple: the investment fund has built its reputation as a vulture fund on buying the debts of states in crisis for a pittance. Then, accompanied by his team of lawyers, he sets in motion the judicial apparatus to force debtor states to pay their debts in full. Elliott is not satisfied with the crumbs that can be obtained during the debt renegotiations proposed by the States. Argentina lived the bitter experience of this when it stopped paying in July 2014, bowing under the yoke of Paul Singer. The head of Eliott Management had presented himself as the savior of Latin America’s third largest economy in the midst of its most serious economic crisis on the eve of Christmas 2001.

The country had declared itself in default due to the impossibility of repaying the colossal debt of almost 100 billion dollars, inherited from the dictatorship of the generals (1976-1983) and the financing of the parity of the Argentine peso with the dollar in the decade 1990. Argentines could no longer withdraw money from their bank accounts and the country changed its president five times in a few days… What was a dramatic episode for an entire country seems to be an incredible opportunity for Paul Singer to buy a sovereign debt of an Argentina on the verge of bankruptcy.

In the Argentine case, the head of Elliott Management would have made a drop of 1,600% at the end of a procedure that will have lasted 14 years. Argentina collapsed without which the country would not have been able to access the financial markets to finance itself again. The very patient fund had already been exercised a few years earlier with battered countries like Peru, Zambia and the Congo that bowed to the intransigence of Elliott Management. In 1996, he seized Peruvian loans paid off at bargain prices before recouping nearly $60 million from Peru… after buying them for $11 million a few years earlier. Later, he repeated the Peruvian success, this time bringing the Democratic Republic of the Congo to its knees after buying the country’s debt for a pittance.

The wolf in the fold

Battleground states are no longer Elliott Management’s only playing field. The activist fund invests in the capital of companies that are weak or showing organizational flaws and then engages heavily with their management to win their case. It’s your trademark. It must be said that before sowing terror in the financial markets, Paul Singer, a Harvard graduate in his pocket, plied his skills as a corporate lawyer on Wall Street.

Among the dams of this investment fund we can mention eBay. Elliott Mangement had asked the famous electronic trading platform, in which it held 4% of the capital, to reorganize its activities and sell some of them in order to double its stock value in the next two years. At the end of 2018, the fund managed by Paul Singer was invited to acquire a 2.5% stake in Pernod Ricard. The fund found the results of internally launched operating performance improvement plans disappointing to the extent that Pernod Ricard posted “an operating margin five points lower than Diageo, the closest competitor”.

The objective is always the same: to put pressure on the management of target companies whenever the results do not meet Elliott Management’s expectations. If necessary, the investment fund does not bother to be nice to its interlocutor. In Italy he managed to have the head of Vincent Bolloré whom he expelled from the board of directors of Telecom Italia in May 2018. The king of stock market incursions found himself this time in the position of the watered sprinkler … pleasure of the American ogre.

Sabrina Sadgui – ©2022 BFM Bourse