Hedge fund manager Och-Ziff Capital Management Group has submitted a filing with the SEC for a $2 billion IPO. The stock to be sold will be Class A shares, which will have limited influence on the running of the company. The more powerful Class B shares will be controlled entirely by founder Daniel Och. The firm manages $26.8 billion, a fourfold increase since 2002. Last year, its earnings more than doubled to $588 million. In a move that differentiates this IPO from June's $4.75 billion IPO of private equity firm Blackstone Group, Och-Ziff's partners will reinvest the proceeds into the company for five years. Blackstone CEO Stephen Schwarzman was criticized for using his company's IPO to cash in personally. The reinvestment might also shield Och-Ziff from a threat from bills currently before Congress designed to raise the taxes of investment firms that become publicly traded partnerships. "Och-Ziff could argue for capital-gains treatment because they've got their own money at risk," said hedge fund lawyer Steven Howard. In February, Fortress Investment Group became the first hedge fund manager to go public. The burgeoning interest among hedge funds and private equity firms in IPOs "may be a market top," according to hedge fund advisor Michael Napoli. "Why not realize some value when the flows from investors continue."
Sources: Och-Ziff's filing with the SEC, TheStreet.com I, II [video], Wall Street Journal, MarketWatch, Bloomberg
Commentary: Senate Legislation Takes Aim at Blackstone, Fortress • Blackstone Closing Below IPO: More Signs of Market Weakness? • Four Ways To Gain Hedge Fund Exposure On The Public Market
Stocks/ETFs to watch: Blackstone Group LP (NYSE:BX), Fortress Investment Group LLC (NYSE:FIG). ETFs: streetTRACKS KBW Capital markets (NYSEARCA:KCE)
Conference call transcripts: Fortress Investment Group Q1 2007
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