The very suggestion that an entity like Fortress Investments, preaching the benefits of private ownership, was suitable for listing on the public markets always struck us as clownish idea.
The stock floated two years ago and promptly popped to a 68 per cent premium above the $18.50 IPO price, causing Roger Ehrenberg to ask at the time: 40xs earnings? Are you stoned?
Now the price is flirting dangerously with the $1 de-list rule in the US, there is growing speculation that the asset manager might go private once more. And, with the debt markets still shut to those wanting to fund buy-outs, the assumption is that the Fortress principals, led by Wes Edens, would use their own money to fund the deal.
Can they afford to? Almost certainly.
Re-visiting the IPO prospectus for a firm like Fortress brings generalised comic relief (10 banks were employed to sell an 8.6 per cent stake), but also offers a reminder that financiers like Edens actually believed the tosh they were distributing at the time. i.e. They didn’t sell any stock.
They had taken plenty of cash out of the business prior to the float. The five Fortress principals, including Edens, trousered a collective $447m in 2006 and then a further $410m in 2007. They also picked up $888m when Nomura took a 15 per cent stake prior to the float, but the cash raised in the IPO went into the company, not into the pockets of principals.
So that’s a $1.75bn pot two years ago against a current free float in Fortress of just 94m shares valued at $184m on Monday in New York.
Surely Edens et al can’t have blown 90 per cent of their money? Can they?
