It's easy to see how tempting it might be for Leon Black to take his private equity firm, Apollo Management, public right now. After all, if one group of investors has spurned your shares in one place, why not just try selling those same shares to a different investor group in another place?
That's essentially what Apollo is trying to do with its planned initial public offering announced yesterday. Last summer, the private equity firm sold its shares on a private exchange for institutional investors for $24 per share, raising $716 million. On Monday, they traded for $14 per share.
The plan, according to the firm's regulatory filing, is to sell those shares on the New York Stock Exchange for $14 each, raising $418 million. The hope is that, by opening up the offering to the broader investing public, the shares will regain some of their losses.
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Although the company has been very successful in the past raising billions in its funds, since July it has not been easy money. The subprime fallout led to the decline in availability of asset-backed commercial paper and debt underwriting. "Based on the performance of many of our portfolio companies and capital markets funds in the third and fourth quarter of 2007, the impact to date of these events on our private equity and capital markets funds has resulted in a reduction in revenue," Apollo's prospectus says.
The firm warns that if the disruption continues, it may experience "further tightening of liquidity, reduced earnings and cash flow, impairment charges, as well as challenges in raising additional capital, obtaining investment financing and making investments on attractive terms."