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Seagate LBO Dead: Here Are The Latecomer Fund Casualties

Courtesy of Tyler Durden

One of the most long-suffering LBO names, Seagate Tech, has just decided to pull the plug on its going private aspirations. After on October 14 months of LBO rumors culminated with a press release from STX that the firm had received a “preliminary indication of interest regarding a going private transaction”, today, just over a month later, the foreplay ended, and management is now forced to appease its angry shareholders by announcing a $2 billion share buyback having been snubbed by its PE suitor. Of course, this is too little, too late, and the stock is getting gutted in the after hours session. At last check the stock was just above $13, or a 6% slide from closing. Which begs the question: which hedge funds jumped late on the LBO bandwagon hoping to receive some of that 20% upside love? Well, quite a few it appears. The list below shows all the funds who bought for the first time by September 30, and possibly later. After all the LBO was not announced until October 14, and in this broken market it would be stupid to assume that this information was not leaked in advance. The question remains: who bought when, and who sold when. And how many of those who still have not sold, and played this name for the LBO are now stuck with far less valuable stock certificates?

Here are those who may have been smart to sell in advance of today’s press release: all the funds below held zero or nominal amounts of STX shares in the June 30 quarter and ramped up heading into October (i.e., position is of September 30):

  • Coatue: 4.2 million
  • SG Gestion: 3.1 million
  • Lazard Asset Management: 2.4 million
  • SAC Capital (oops): 2.3 million
  • Schroder Investment Management: 1.4 million
  • Janus Capital (oops): 1.2 million
  • CastleRock Management: 1.1 million
  • Freestone Capital: 1.1 million
  • Tahithromos: 1.0 million
  • Suttonbrook Capital: 1.0 million
  • Met Investors Advisory: 1.0 million
  • J. Goldman & Co: 0.8 million
  • First Eagle Investment: 0.7 million

And so forth. Altogether there are about 20 million shares bought on what was most likely an LBO catalyst expectation, and that possibility is now over. No buyback, absent a full MBO, will placate the bulk of these investors, some of which already have redemption issues due to recent subpoenas into their trading practices. Which once again begs the question: who will defect first. A little over 1 million shares were dumped in the AH session. That leaves about 19 million shares orphaned without a catalyst. And a far bigger question for all comparable hard disk LBOs: has cloud computing killed the hard disk model? Will anyone besides servers soon be needing hard disks now that distributed computing is becoming the norm?

 

 


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