fortress case study

Topics: Stock market, Hedge fund, Investment Pages: 8 (429 words) Published: April 13, 2014
Fortress Investment

AISHWARYA RATNA PANDEY
NIMA OTAREDIAN
ATEFEH NADERKHANI

Table of Contents







Company profile
Going Public
Structure
Stock Market
Analysis
Aftermath

Company Profile




Fortress Investment Group was founded by
Wesley Edens , Randal Nardone and Robert
Kauffman in 1998. It is a leading global
alternative asset fund with approximately
$29.9 billion in assets under management
(AUM) as of March 31, 2007.
They have three core business




Private equity funds
Hedge funds
Publicly traded vehicles- Castles

Castles- $ 3Bn
Hedge fund$9.6Bn

Private equity
fund- $ 17.5Bn

STRATEGYStrong Investment Performance
Expand our Investment Products
STRENGTHPresence in world market
Good investment return
Strong investor relation around 650 investors

Why I
am going
public?

Going Public










To access capital markets to raise money for the
expansion of operations
To acquire other companies with publicly traded
stock as the currency
To attract and retain talented employees
To diversify and reduce investor holdings
To provide liquidity for shareholders
To enhance the company’s reputation
Increase in earning in 2007 from 2006 around 65.7%
(Third quarter)
83% growth of company earning compare to 2006.
Company growth rate was more than 50% pace year over
year.

Structure
Principals hold 100% of the Class B
shares, combined voting power but
no economic interest LLC.
Class A share will have 100%
economic interest .
Estimated offering price is
$18.50/share
Class A
share

Class B
share

Voting rights

Nomura

55,071,450
(61.6%)

--

13.7%

Share
offered

34,286,000
(38.4%)

---

8.6%

Principal
owner

---

312,071,550

77.7%

Choosing a stock market
Earnings history, shareholders’ equity, market capitalization, number of expected shareholders, and corporate governance. A company seeking to go public must choose the market that is right for its stock. 




The NYSE is extremely capacious at a market capitalisation of $5 000 billion Better governance (SEC regulations, monitoring by gatekeepers etc.) leading to higher share valuations (source: Doidge, Karolyz & Stulz, 2005)

Large institutional investors

ANALYSIS
DCF - Valuation

SWOT - Analysis

Growth 42%
p.a.

•Strengths

•Weaknesses

Management Fees
F$414M

Increase in
A.U.M

Revenue streams
F$1.2B

-Access to
capital
-Liquidity
event
-Global reach
and visibility
-Loss of control
-Loss of privacy
-Litigation risk
Sarbanes-Oxley
laws

•Threats

Incentive Fees
F$780M

-Volatility and
illiquidity of funds
-Dependence
versus peers on
incentive income

Growth 87%
p.a.
In gross fund
return
percentages

Assumptions

-M&A
-Greater
shareholder
value

Analyst Estimates

DCF

Dividend Payout Rate

Perpetual Value of Div

$54.96

Average Lifetime

•Opportunities

75%
6 Yrs

NPV Dividends

$10.98

Earnings over invested
capital

2.5X

Present Value Perpetuity

$17.70

Cost of Capital

12%

DCF value Per Share

$28.59

Dividend Growth Rate

4%

One-Year Forward Target

$32.02

Source: Lehman Brothers Analyst Report, March 23, 2007

Aftermath
•First private hedge fund to go public
•Start of wave of public offerings in sector
•Opened up investment to the public
•Enhanced performance
•Capital growth

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