Contributor Since 2010
Third Point Public trades on the London Stock Exchange and can also be bought and sold on the pink sheets as TPNTF. It is the public security of the hedge fund Third Point, managed by Daniel Loeb. The fund came public in July of 2007, in the quiet months before the financial markets combusted. Unfortunately for Third Point investors, Loeb did not avoid the worst of the crisis, and the fund plunged from the offering price of $10 to below $4, a horrendous performance for an absolute value fund. By now all of that is ancient history, and the fund has recovered nicely in the years since, currently trading at $11.35, a more than $2 discount to the $13.68 NAV (after the recent $.60 dividend).
The good and the bad news for investors is that the discount shows no sign of narrowing in the near future. Despite recently returning cash to shareholders, buying back shares and promising to institute a 3-4% dividend in 2013, the fund remains stuck at what appears to be a permanent discount to NAV. There may be many reasons for this - the listing in London, the poor initial performance, incumbent sellers - but a discount is a discount, and an opportunity for patient holders.
For those not familiar with Loeb, Third Point invests in a typical long-short structure, buying for value and hedging with overpriced securities. The fund is generally invested 80%-150% long and 30%-50% short, in both the debt and equity markets, for a gross exposure of up to 200%. That leverage covers some of the high fees the manager pays itself, the typical 2% and 20% hedge fund structure. To his credit, Loeb has shown commitment to his public fund holders, as demonstrated by the recent dividend and share purchases. More important than anything else, of course, is fund performance, and Loeb has nicely outperformed the market recently and over his nearly 20-year career.
For some investors, finding or trading Third Point Public may not be as easy as hitting up WMT in the etrade account. The stock trades in three currencies on the London Exchange (TPOG (British Pound), TPOE (Euro), and TPOU (US dollar)), and unless your broker offers access to the London exchange, you may have no option but the pink sheets. In addition, the fund is headquartered in Guernsey, a small island somewhere in the English Channel, and is not regulated by the SEC. Caveat investor. Due to tax rules concerning foreign funds, your best option is owning Third Point in a Roth IRA or similar account.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Additional disclosure: I am long TPOU (TPOU.L on Yahoo! Finance).