Friday, February 09, 2007

Fortress' IPO

In a "must talk about case" for all of my classes, Fortress went public today.

Who is Fortress? From Marketwatch: "Fortress Investment Group -- not a hedge fund -- but a nine-year-old company that runs hedge funds."

First the facts:

From Business Week: Investors Storm Fortress IPO:
"In the most widely anticipated public offering of the young year, Fortress
Investment Group (FIG), the first U.S.-based hedge fund to go public, stormed
the ramparts. Shares in the alternative investment outfit were trading around
$32 in the early going Feb. 9 -- 73% above the offering price set the previous
day but down from the intra-day high of $37. The shares opened trading at $35."

The IPO:

From the NY Times:
"The first hedge fund and private equity company to go public in the United States will make its market debut today at $18.50 a share — at the high end of its expected price range."

and later:
"Fortress is trading some of that privacy and cachet for capital.
The company raised $634 million from the sale of 34.3 million shares yesterday.
Demand for the offering was strong, analysts said. People who attended a
presentation by Fortress on the offering on Wednesday said that it was standing
room only. Last week, Fortress said in a filing that it expected to sell the
shares in a range of $16.50 to $18.50 each."

Some interesting things to note:
  • The VAST majority of the price appreciation went to the first buyers (IPO was at 18.50, first trade in secondary market was $35).
  • Can a hedge fund company (most of whom love secrecy) maintain competitive advantages as a public firm? (In fact other hedge funds that have gone public have shied away from issuing in the US due to regulations that would lessen their secrecy.)
  • Does the IPO signal the cooling of the hedge fund industry? (from MarketWatch:"Under pressure, managers like those at Fortress may be looking to a reliable source to keep the new money rolling in, said Roy Smith, a former partner at Goldman, now a finance professor at New York University. Hedge funds remain a fashionable place to be for small-time investors who recognize it as a symbol of sophistication...."When the smart money is pulling out," Smith said. "It's time to start selling to the dumb money." ")
Yep, we'll be talking about this one in class!

No comments: