Wednesday, April 11, 2012

Oaktree Response Underwhelming

Reuters reported:

Oaktree Capital Management sold fewer shares than expected in an initial public offering that priced at the bottom of an expected range on Wednesday, a market source said.

Oaktree, which had $75 billion of assets under management as of the end of 2011, priced 8.84 million shares at $43, raising $380.3 million. It had intended to sell 11.3 million shares at between $43 and $46 each.
I crafted a series of scenarios for Oaktree's IPO.

Oaktree's performance puts it squarely into the "Craptree" category.

Craptree -- The company prices at the low end of the range, then muddles along

The offering had a touch of "Yaktree", given the offering fell nearly 2.5 million shares short of the planned 11.3 million shares..This flies in the face of reports Oaktree was "three times covered" on the buy side.

Yaktree -- The issuance is withdrawn due to investors getting sick at the prospect of owning the company.

Oaktree is the bellwether for upcoming private equity underwriter (PEU) IPO's.

The tepid response to the IPO raised concerns that investors have become wary of private equity manager flotations, including the upcoming offering from Carlyle Group LP.

Should Carlyle's IPO pull a Craptree/Yaktree, I might have to label it The Ca-Bile Group.   

Update 4-12-12:  Oaktree traded as low as $41 in its first day on the NYSE.  It closed at $42.39, down 1.4% from its IPO price.   That meets my Craptree criteria.