Fortress: When Private Equity Insiders Sell Out!

Banking, finance, and taxes

Published: March 13, 2014 10:30 am

Fortress Investment Group LLC (NYSE: FIG) is going to see a wave of what would be considered to be insider selling. The private equity firm has announced that it has commenced a public offering to sell 28,280,000 Class A shares, which actually represent limited liability company interests.

This is a big deal on the surface, because the offering represents close to $225 million in total proceeds, while the company’s market cap is just under $1.5 billion.

Certain officers and senior employees of Fortress are selling 5,077,141 Class A shares. Fortress and certain selling shareholders have also granted the underwriters a 30-day option to purchase up to 4,242,000 additional Class A shares.

The offering said:

Fortress intends to use all of its net proceeds from this offering to purchase an equivalent number of outstanding Fortress Operating Group partnership units from its principals. Fortress will not retain any proceeds from the sale of shares by the selling shareholders.

Citigroup and Credit Suisse will serve as joint book-running managers and as representatives of the several underwriters in the offering.

Insiders selling in this offering have been identified as follows: Peter Briger Jr., Wesley Edens, Randal Nardone and Michael Novogratz, and additional selling shareholders to be identified in the future. Other insiders and sellers have been shown in a snapshot of the “selling shareholders” portion of the SEC filing below.

Fortress shares were trading down 3.5% at $8.07 within the first hour of trading, in a 52-week range of $5.61 to $9.16. What really stands out here was the trading volume of 11.7 million shares, already close to 10 times normal trading volume.

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