The quiet period for the underwriters of Third Point Reinsurance (TPRE) will end on Monday, September 9th. This event should be a positive for the stock because of the strong number of all-star underwriters which we expect will be issuing positive research reports early Monday morning. The underwriting group includes J.P. Morgan, Credit Suisse, Morgan Stanley, BofA Merrill Lynch, and Citi, who were all lead managers on the deal.
Third Point Reinsurance, the reinsurance wing of Third Point Capital, looks to be a promising prospect for investors in the wake of its mid-August introduction to the New York Stock Exchange. The stock settled within expected pricing parameters and has thus far remained stable. Investor confidence in the stock will likely be driven by a combination of Third Point Capital's relationship with its well-established parent and by the presence of Third Point Capital's well-known hedge manager, Dan Loeb.
For the uninitiated, reinsurance is a form of backing for insurance companies. To oversimplify, it agrees to take over policies from the companies, and charges them for doing so. Loeb entered the reinsurance fray at a time when many hedge funds were making similar moves. Third Point Reinsurance's portfolio is managed by Third Point Capital, providing Loeb with a steady stream of revenue to put towards his historically successful investment strategies.
Dan Loeb is amongst the most successful of a generation of so-called activist investors, and the attachment of his name to the newly public reinsurance company should instill confidence in potential investors. Third Point Capital investors have long enjoyed the hedge fund's consistent and sometimes spectacular returns resulting from positions in perennial winners like Yahoo (YHOO). The recent addition of a large stake in Sotheby's (BID), making Third Point Capital a 5.7% owner and a power player within the auction house's executive structure and board - a textbook example of Loeb's hands-on investment style. The long-running success of Loeb's hedge fund is partly due to his willingness to intervene in unhealthy or stagnant boardrooms.
While Loeb does not manage the everyday operations of Third Point Reinsurance, as an 8.5% stakeholder in the company he seems likely to remain closely involved - he even joined the reinsurance company's executive team to ring the NYSE bell as the company went public. His interest in maintaining a stable flow of income from the reinsurance firm, along with the financial backing that Third Point Capital will provide to its younger reinsurance arm, a guarantee that his expertise will be put to good use at Third Point Reinsurance. Third Point Capital also has an interest in maintaining TPRE because of the reinsurance company's tax advantages gained from its base in Bermuda.
The presence of Loeb and Third Point Capital in Third Point Reinsurance's corner make TPRE an inviting offering for investors ahead on the end of the quiet period.