The firm’s co-CEO Daniel Waters told employees the spin-off was going ahead in a memo sent out on Thursday, despite the insider trading debacle that has plagued the firm since November.
One of the revised terms will be the cost of the spin-off; orginally it was meant to cost FrontPoint $70 million to split, but now the charge will be $126 million (FWIW, Business Insider first predicted Morgan Stanley would take a loss on the FrontPoint spin-off back in August), according to the Post.
FrontPoint’s entire healthcare team was sacked in December due to a scandal involving then-portfolio manager Chip Skowron.
Apparently the scandal, which resulted in billions in redemptions, forced FrontPoint “to renegotiate and revise the terms of the spin-off,” Waters told employees.
Waters also tried to play down reports that fund manager Steve Eisman was leaving the hedge fund to launch his own firm:
Since the end of last year we have been in active discussions with Steve regarding evolving the nature his relationship with FrontPoint. This evolution would entail giving Steve more operating flexibility and control over his own destiny…
As a part of the agreement we have been working on, Steve will continue managing money on behalf of clients for years to come.”
But today the Post reports Eisman will exit before the end of 2011, but “may not sever ties completely.”
Apparently Eisman has “grown restless at FrontPoint… [and] is unhappy about the drag on his fund” from the insider trading scandal.