UPDATE: Elliott Drops Court Case Against Trade Magazine
August 31 2010 - 5:00PM
Dow Jones News
Hedge fund manager Elliott Management Corp. on Tuesday dropped
its court case against trade publication Absolute Return + Alpha,
bringing to a close a battle over public disclosure of a hedge
fund's investments.
Elliott withdrew its court petition seeking discovery about who
leaked Elliott's investor letter to the publication just two days
before the trade magazine was due to submit an affidavit to the New
York State court in Manhattan. The magazine published its article
Thursday despite the pending court case.
Elliott, which argued last week that disclosure of its positions
in the investor letter would harm Elliott and damage its
competitive position, said, "developments since the application was
filed made the discovery unnecessary."
Elliott's spokesman didn't specify what those developments
were.
A court hearing originally scheduled to be heard Sept. 9 is
canceled now that Elliott has dropped the case.
The petition was watched closely by both the hedge-fund industry
and the media because it was an unprecedented attempt to curb the
public disclosure of trading positions stated in investor letters.
Fund managers consider investor letters to be proprietary
intellectual property.
But the case faced an extremely high hurdle in New York's shield
law, which protects journalists from disclosing the identities of
their sources.
"This was a blatant attempt to bully us and it backfired," the
magazine's editor, Michelle Celarier, said in a statement posted on
the publication's website Tuesday. "While trying to intimidate us
into not publishing the story, Elliott did a disservice to
itself."
In its story last week, Absolute Return + Alpha said Elliott's
fund gained 5.3% in the six months ended June 30, outperforming the
S&P 500, which declined by 6.6% during the period.
It also cited the hedge fund manager's 26-page investor letter
as saying that Elliott profited in the second quarter from debt and
convertible investments, but lost on distressed securities in
Lehman Brothers Holdings Inc., General Growth Properties Inc.
(GGP), and Washington Mutual Inc. It added it suffered losses from
event arbitrage trades on Pacific Century Premium Development Ltd.
(PCFPF, 0432.HK) and Epicor Software Corp. (EPIC), the publication
said.
Another hedge fund manager, who declined to be named, said
exposing Elliott's losing positions allows other market
participants to anticipate a sale in the companies involved and
could give Elliott an unfavorable price in transactions, especially
those in the opaque convertible bond market.
Elliott declined to comment on Absolute Return + Alpha's
comment.
-By Amy Or, Dow Jones Newswires; +1 212 416 3142;
amy.or@dowjones.com
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