For 15 months, the activist investor William A. Ackman has accused Herbalife of being a pyramid scheme, betting $1 billion on its collapse. Since Mr. Ackman’s crusade began in December 2012, he has lobbied members of Congress to press state and federal regulators, specifically the Federal Trade Commission, to investigate Herbalife.
So while it was far from a victory for Mr. Ackman, Herbalife’s disclosure on Wednesday that it had received a civil investigative demand from the F.T.C. could be a boon for Mr. Ackman’s $1 billion bet against the company after a series of setbacks, Alexandra Stevenson and Peter Eavis write in DealBook. Indeed, the news of the investigation prompted a sell-off in the stock, which dropped more than 15 percent on Wednesday before recovering somewhat. It closed down 7.4 percent, at $60.57 a share.
QUESTIONING THE ROT IN BANKING CULTURE  | Many of the sins big banks have committed in recent years have been blamed on a few bad actors. Now, some government authorities are publicly questioning whether such misdeeds â€" including money laundering, market rigging, selling faulty financial products â€" are signs that there is something rotten in bank culture, Peter Eavis writes in DealBook. Congress and government authorities have taken many steps to prevent banks from being “too big to fail,†but these efforts, according to some regulators, have not focused on cleaning up the deeply rooted cultural and ethical failures at many large financial institutions.
Regulators have recently begun to voice their concerns, but they may find it hard to convince the public that they are serious, given how long they have waited since the financial crisis to question the moral fabric of the banking industry. And as new scandals occur, they may have to “take to the bully pulpit†to assert these types of critical pronouncements, Mr. Eavis writes.
“At the heart of the issue is an inviolate social contract that bankers are supposed to honor. The government agrees to protect banks from collapse, and in return, bankers are meant to uphold the highest ethics when handling other people’s money. But when lawbreaking and other missteps proliferate at banks, it is a sign that the industry has stopped cleaving to the special contract, endangering taxpayers,†Mr. Eavis writes. “The big question is whether regulators have the resolve to back up their tough words with meaningful punishments.â€
A HEFTY FINE FOR FORMER GOLDMAN SACHS TRADER Â |Â The Securities and Exchange Commission has not had the greatest luck in the courtroom. But in a ruling that may embolden the regulator to take more cases to trial, a federal judge on Wednesday ordered Fabrice Tourre, the former Goldman Sachs trader who pocketed millions of dollars on Wall Street before a federal investigation derailed his career and redefined him as the face of the financial crisis, to pay the S.E.C. $825,000 for defrauding investors in a mortgage deal that imploded during the crisis, Ben Protess writes in DealBook.
Mr. Protess writes: “The ruling, a capstone to one of the S.E.C.’s most prominent Wall Street cases and its first significant courtroom victory stemming from the financial crisis, was equal parts validation and leverage for an agency that has threatened harsher penalties and fewer settlements. The case could signal to Wall Street employees, with all their legal resources, that the agency is willing to take them on and just might win.†But, he adds, the S.E.C.’s track record in other recent trials â€" it has lost five of its last 12 â€" shows that challenges remain.
The judge’s decision is the latest setback for Mr. Tourre. Most recently, the University of Chicago confirmed last week that he would no longer teach an undergraduate economics class in the spring quarter.
ON THE AGENDA  | Weekly jobless claims are out at 8:30 a.m. The latest data for retail sales in February is out at 8:30 a.m. February’s import and export price indexes are out at 8:30 a.m. Business inventories for January are out at 10 a.m. The Treasury budget report for February is released at 2 p.m. Timothy J. Sloan, the chief financial officer of Wells Fargo, is on CNBC at 7:15 a.m. Sean Rad, the chief executive of the dating application Tinder, is on CNBC at 5 p.m. Happy birthday, Jamie Dimon. Mr. Dimon, the chairman and chief executive of JPMorgan Chase, celebrates birthday No. 58.
Federal Reserve Confirmation Hearing: The Senate Banking Committee holds a rescheduled confirmation hearing at 10 a.m. for Stanley Fischer, a former head of the Bank of Israel, who was nominated as the Federal Reserve’s next vice chairman. Also up for confirmation are Lael Brainard, a former Treasury official who has been nominated to the Fed’s board of governors, and a current Fed governor, Jerome H. Powell, who is up for a new term.
CANDY CRUSH MAKER PUTS VALUE AT $7.6 BILLION  | King Digital Entertainment, the maker of the wildly popular game Candy Crush Saga, said on Wednesday that it expected to price its shares at $21 to $24 each in its initial public offering, which would value the company at $7.6 billion, Michael J. de la Merced and Nick Wingfield write in DealBook. But while the price seems tasty, the offering values King at a discount to other video game companies, possibly reflecting caution about the company’s reliance on its megahit, which accounts for nearly 80 percent of its earnings, they add.
King’s disclosures have led many analysts to question whether the game maker can continue to thrive as a public company once its biggest hit fades in popularity. For its part, the company has warned that it expects Candy Crush to decline over time and contribute less to its sales.
Robert Cyran of Reuters Breakingviews writes: “The company makes much of its ‘unique, repeatable, scalable’ system of developing and distributing new games. There’s some truth to that â€" the company has been cash-flow positive for nine years. So it can probably trundle along for a while even if it can’t develop a new hit when its current one fades. That’s hardly a basis for such a lofty I.P.O. valuation.â€
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Berkshire Shrinks Ties to the Graham Family  | Berkshire Hathaway disclosed that it planned to exchange the bulk of its holdings in Graham Holdings â€" about 1.6 million shares â€" for a Miami television station, cash and some shares that Graham holds in Berkshire. DealBook »
Bouygues Raises Bid for SFR, Vivendi’s Mobile Unit  | Bouygues said on Thursday that it had raised its bid for SFR, the mobile phone unit of Vivendi, as it competed in a bidding war with the cable and cellphone operator Altice. Vivendi’s board is expected to consider the competing proposals on Friday. DealBook »
Lineage Logistics to Buy Millard Refrigerated  | Lineage Logistics Holdings is said to have agreed to acquire Millard Refrigerated Services in a deal valued at about $1 billion, The Wall Street Journal writes, citing unidentified people familiar with the situation. WALL STREET JOURNAL
Energy XXI to Acquire EPL Oil & Gas  | Energy XXI has agreed to buy EPL Oil & Gas in a $1.53 billion cash and stock deal, The Wall Street Journal reports. The merger would result in the largest publicly traded oil and natural gas producer in the Gulf of Mexico’s shallow waters, known as the Shelf. WALL STREET JOURNAL
Average Wall St. Bonus Increased by 15% in 2013  | The average bonus was $164,530 for workers at New York’s security firms, the highest average bonus since before the financial crisis in 2007. DealBook »
Citi Reduces the Pay of Its Mexico Chairman Amid Inquiries  | Citigroup cut the 2013 pay of its chairman for Mexico, Manuel Medina-Mora, by about $1.1 million from 2012, citing “control issues†at its Banamex USA unit. DealBook »
British Regulator Adds Industry Veteran to Supervise Investment Banks  | Julia Hoggett, a managing director at Bank of America Merrill Lynch, will join the Financial Conduct Authority in May as head of investment banking as the regulator looks to bolster its expertise. DealBook »
Goldman Sachs Investment Bank Strategy Chief Departs  | Samuel Robinson, the chief administrative officer and head of strategy for the investment banking division at Goldman Sachs, is leaving the firm after 18 years, Bloomberg News writes. BLOOMBERG NEWS
Renaissance Learning Is Sold to Hellman & Friedman for $1.1 Billion  | The education analysis company Renaissance Learning plans to announce that it has been sold to the private equity firm Hellman & Friedman for $1.1 billion. Google Capital, which invested in the company last month, plans to stay on board. DealBook »
K.K.R. Considers Sale of Singer Sewing Machine Company  | The private equity firm Kohlberg Kravis Roberts is exploring a sale of the Singer sewing machine company in a deal that could fetch more than $500 million, Reuters reports. REUTERS
Cloud Marketing Firm Vocus Explores Sale  | Industry rivals and private equity firms including GTCR have expressed interest in buying Vocus, a provider of cloud marketing software, which is looking to sell itself, Reuters writes, citing unidentified people familiar with the situation. REUTERS
Elliott Raises Stake in Juniper Networks  | The hedge fund Elliott Management is raising its bet on Juniper Networks after the networking equipment company announced a series of new initiatives. DealBook »
Hedge Fund Managers Could Be Living in a Fake Reality  | “The question some of the world’s biggest hedge funds are starting to ask is whether overly placid investors will also wake up to discover they are living in a ‘Truman Show market’ - where central bankers’ ultra loose monetary policy has manufactured a fake reality that is bound to end,†Miles Johnson writes in The Financial Times. FINANCIAL TIMES
A Possible ‘Inside Joke’ in SAC’s New Name  | In a letter to employees on Tuesday, SAC Capital Advisors described its name change, to Point72, as a reference to the hedge funds Stamford, Conn., address. “While the address could well be the principal reason, the number 72 suggests another possible meaning that people seem to be missing,†Quartz writes. In finance, the “rule of 72†refers to a quick calculation used to figure out how long it will take for an investment to double at a fixed annual rate of return. QUARTZ
Danish Outsourcing Firm ISS Surges in I.P.O.  | The third time was a charm for ISS, which went public on the Nasdaq OMX Copenhagen exchange on Thursday after planned offerings in 2007 and 2011 were delayed. DealBook »
Alibaba Is Said to Be Close to Choosing New York for I.P.O.  | The Chinese e-commerce giant Alibaba is “95 percent certain†it will choose New York over Hong Kong for its initial public offering, The Financial Times reports, citing unidentified people familiar with the situation. FINANCIAL TIMES
British Private Equity Firm Plans I.P.O. of Phibro Animal Health  | The British private equity firm 3i Group is planning to sell a stake in Phibro Animal Health, a maker and marketer of animal health and nutrition products, in an initial public offering that aims to raise as much as $230 million, The Wall Street Journal writes. WALL STREET JOURNAL
Premium Pet Food Firm Preparing for I.P.O. Â |Â The premium pet food company Blue Buffalo has selected JPMorgan Chase, Morgan Stanley and Citigroup to lead an initial public offering that could come later this year, Reuters writes, citing unidentified people familiar with the situation. REUTERS
No Plans Yet for Palantir I.P.O. Â |Â Palantir Technologies, a semisecretive data analytics firm backed in part by the C.I.A., said it would not go public in the near future, CNBC reports. CNBC
Credit Karma, a Credit Score Service, Raises $85 Million  | The nearly seven-year-old start-up Credit Karma announced a third round of fund-raising on Wednesday. It was led by Google through an investment arm that specializes in late-stage technology companies. DealBook »
Silicon Valley’s Youth Problem  | In start-up land, the young barely talk to the old (and vice versa). That makes for a lot of cool applications. But great technology? Not so much, Yiren Lu writes in The New York Times Magazine. NEW YORK TIMES MAGAZINE
Supporting Start-Ups With Connections, Advice and Caffeine  | The 1 Million Cups program is run by entrepreneurs to help build the start-up community, and local chapters are springing up across the country, The New York Times reports. NEW YORK TIMES
Atomico Adds to Investment in Brazil  | The venture capital firm led by Niklas Zennstrom, a co-founder of Skype, has led a new round of financing in Bebestore, an online baby and maternal goods company in Brazil that it has backed before. The new investment indicates that e-commerce remains attractive in Brazil. DealBook »
Jefferies in $25 Million Settlement With S.E.C.  | The Jefferies Group, the investment bank and brokerage firm, agreed to settle accusations by the Securities and Exchange Commission that it failed to supervise traders who lied to investors about the price of mortgage-backed securities. DealBook »
Financial Adviser Sidesteps Prison in Bond-Rigging Case  | Despite prosecutors’ recommendation for a prison sentence of at least 19 years, David Rubin of CDR Financial Products was sentenced to two years’ probation. DealBook »
Fannie Mae Investors May Be Using Magic Calculators  | The price of Fannie Mae’s preferred stock is up more than tenfold in 18 months, but even cheerful assumptions suggest its business is not worth enough for shareholders to get much, if anything, back after an overhaul, Daniel Indiviglio and Richard Beales write in Reuters Breakingviews. DealBook »
Fed Nominee Has a Long History of Policy Leadership  | Stanley Fischer, the nominee for vice chairman of the Federal Reserve, has been an influential academic as well as head of the Bank of Israel, The New York Times reports. NEW YORK TIMES
Fed Official Predicts a Soft Landing  | John Williams, president of the Federal Reserve Bank of San Francisco, answered questions for the Economix blog about the Fed’s retreat from bond buying and forward guidance and said he was optimistic that this time, the Fed will manage to produce a soft landing. NEW YORK TIMES ECONOMIX
China Moves on Banking Reforms  | Higher interest rates and privately owned banks can help strengthen China’s banking system, according to a New York Times editorial. NEW YORK TIMES
