What is going on at JEF?
Stock down like crazy, rumors of bonuses being held back (not confirmed), Handler saying they were defrauded by First Brands..
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tied up in First Brands collapse
Overreaction imo - yes, the LPs of the Pointe Bonita fund will take losses and the fund is likely done, but Jefferies' own exposure was $40M... on a $7B+ revenue base, that is a rounding error
First brands got a lot of money from trade finance l(backed by receivables or contracts) jefferies invested in through asset management fund pointe bonita. Jefferies has worked w first brands for like 10 years.
In these trade finance deals, it was found out first brands only has ~300 mil in acct receivables while pledging it to multiple creditors against billions in financing, which is where I imagine the fraud comes from. QoE also never was produced after being asked for. 2 billion that was supposed to go to first brands factored receivables has also disappeared with no one having a clue where it went.
All in all a bigass shitshow that reflects poorly on jefferies given their history w first brands and how long they have been either fooled by FB or knowingly engaging in fraud with them. Agree that stock reaction is likely overblown given Jeff exposure is significantly less than the amount the stock has moved and this probably only affects bonus for execs since everyone else is paid in cash. Maybe if you worked at Jeff AM this would be cause for concern but not for the IB people
The FB fraud is a nothing pie in terms of JEF insolvency risk and becoming Credit Suisse 2.0.
The general overreaction is more of a testament to how much Wall Street and Main Street dislikes JEF. Remember the Associate in JEF DAL Telecom that passed earlier this year? Everyone was so quick to jump on the bandwagon to bash JEF even though it was later revealed that he OD’d
lol Jeffries shill.
Why do you think he needed to turn to drugs?
They may end up covering investor losses on Point Bonita, akin to what CS/ UBS ultimately ended up doing on Greensill. But even that should be manageable- ie 1bn total.
If things get worse SMBC will likely pump more money into them- they already own 20% and may result in more tie up in their operations.
Jef lev fin was always known as doing iffier deals.. so this is on par.
Jefferies postponed 5k special signing bonus for incoming first years
is this diff than the 10k signing bonus for first years?
Another example of a bank screwing up in non-core divisons and that companies should focus on core competencies.
Jefferies showed us the FB deal. We passed and the seniors commented on how they likely will pass on all Jefferies deals going forward, hard to trust a bank not doing proper diligence.
The thing to focus on isn’t the $40mm of direct exposure - instead put yourself in the mind of an investor into the point Bonita fund. How do you think they pictured that investment being handled and the type of underlying risk it was really taking? Do you think they will be pissed that such a big chunk of the fund was lending to first brands??
I’m just a dumb prospect, but can someone please explain to me why a Jef affiliated fund was buying paper from a Jef IB client hand over fist? Isn’t this a massive conflict of interest?
They are poorly ran and are trying to avoid their Lehman moment
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