Thursday, July 19, 2007

Paperstand (C, LEH, PEP, DJ, CLWR, S, CBK)

According to the WSJ, federal tax authorities are seeking data from Citigroup (C) and Lehman (LEH) to determine whether complex derivatives trades they engineered for hedge-fund and other clients were designed primarily to avoid taxes. Citi and Lehman have received information document requests, or so-called IDRs, from the IRS relating to the use of derivatives by offshore investors, including some big hedge funds, to sidestep withholding taxes on US stock dividend. At stake is more than $1bn in withholding taxes on US stock dividends that are sidestepped by derivatives trades structured by a number of Wall St. firms.

The WSJ reports that PepsiCo (PEP) explored a merger with Nestlé in late spring, which would have created an immense global food concern with increasing emphasis on "wellness" products. The effort was ultimately scuttled over a host of complications. PepsiCo made the initial approach, but Nestlé resisted the idea for fear that Pepsi's reliance on snacks such as potato chips and soft drinks would dilute its mission of building a business around more-healthful food and beverage products. There was also an array of issues in combining PepsiCo with the larger Nestlé.

According to the WSJ, the SEC intends to file civil charges against a Dow Jones (DJ) board member in connection with an unfolding insider-trading case. In recent days, the SEC has notified Dow Jones director David Li, Chmn and CEO of Bank of East Asia, through a Wells notice, that it plans to recommend filing civil charges against him. It isn't clear exactly what the SEC case against Mr. Li is built on or what law they might charge him with violating.

The WSJ reprots that Clearwire (CLWR) and SprintNextel (S) are nearing an agreement to provide roaming service to each other's customers as the two co’s deploy broadband networks with WiMax technology.

Barron’s Online “Inside Scoop” section reports that Christopher & Banks (CBK) stock is near 52w low, but insider selling at the retailer suggests shares have further to fall. On Fri, CFO Andrew Moller sold $668K in stock, or 40K shares. The reduced earnings outlook, combined with the recent insider selling, has caused Michael Painchaud, of Market Profile Theorems, to revise his view on C&B. Painchaud notes that the prior 6 mo’s without insider sales had improved his view of the co. But "given this most recent sale I have to revert to classifying this as a sell [from a hold]," he says. Painchaud adds that insiders have been "very accurate sellers" in the past.

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