Oaktree IPO to Bring Payday for Howard Marks – ValueWalk Premium

Oaktree IPO to Bring Payday for Howard Marks

The IPO bonanza continues, this time with Oaktree Capital who has said that they are looking to raise around $595.2 million in the initial public offering.  The IPO would earn both of the Oaktree Capital founders, including the CEO (and legendary value investor) Howard Marks, around $117 million each and that is without selling any shares.  The financial firm has said they will offer up 12.9 million shares that will be priced between $43 and $46 a share.  The IPO is expected to open in early June.

Oaktree has an interesting investment style which takes on sort of a contrarian, value type of investing mostly.

Members of Oaktree Capital are in a position to strike it rich if this IPO goes the distance.  As I mentioned earlier, Howard S. Marks and Bruce A. Karsh, the founders, could see $117 million payday.  While directors and principals John Frank, Stephen Kaplan and Caleb Kramer could be looking at roughly $5 million each if the IPO is a winner.

This is obviously best case scenario after Oaktree has experienced some hardships over the past year as losses have cut fees and income into the company.  In fact, the firm lost $3 billion in the quarter which is not a good sign for the IPO or the firm.

Here we go again with the IPO fever.  Will investors overvalue Oaktree just as they have done with other recent high flying IPOs?  I am a huge critic on these ridiculous valuations that come out of IPOs because there is just no way these firms that are struggling and/or have no profit can be worth so much money.

Investors clearly are in it for the huge rewards which make IPOs so popular, yet they are usually underperformers over the long run.  In addition, you are required to hold the IPO for a certain amount of days before you are able to sell.  This makes it difficult for investors because if you get a dud then you have to keep it for a certain number of days before you are able to cut losses.

I do not trust these IPOs because I just see so many similarities between now and the late 1990s.  I just do not think that we have really learned our lesson from that time because we are doing the same exact thing now.  It just shows that we do not learn from history.  Which begs the question, will we eventually see a subprime mortgage crisis again as we did in 2008?


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