NEW YORK (TheStreet) -- Harbinger Group (HRG), a holding company majority owned by Philip Falcone's struggling hedge fund Harbinger Capital Partners traded nearly 27% lower after the company announced a secondary offering on Thursday of 20 million shares at a price of $7.50.
While the offering states that three Harbinger Capital funds are the selling shareholders, a source familiar with the situation denies that the sales are a reaction to investor redemptions. Instead, the share sale is part of a long-term plan to increase Harbinger Group's public float on the New York Stock Exchange, the source said.
Falcone is chief executive of Harbinger Group, a holding company with assets spanning from with consumer products and retail, insurance and natural resources, among a diverse set of operations. He also continues to head Harbinger Capital Partners, the hedge fund he founded in 2001 that has been under investor and regulatory scrutiny for the past year.
Prior to Harbinger Group's Thursday share offering, Harbinger Capital funds held over 90% of the company's common shares, according to Securities and Exchange Filings compiled by Bloomberg.In May, Harbinger Capital Partners put LightSquared, a multi-billion dollar 4G wireless investment, into bankruptcy. In June, the Securities and Exchange Commission charged Falcone and Harbinger Capital Partners with fraud, market manipulation and betraying clients in a civil suit. On Dec. 1, Falcone asked a federal judge to dismiss those charges, which alleged that he'd taken an illegal $113 million personal loan from the fund in 2009 to cover personal finances. The fund was also charged by the SEC with manipulating a short squeeze on the debt of MAAX Holdings, another claim Falcone and Harbinger are seeking to dismiss. Harbinger Capital Partners swelled to over $26 billion in the wake of a timely bet against the U.S. subprime mortgage market prior to the housing bust; however, recent reports indicate the fund's assets have declined to $6 billion amid fund losses and investor outflows. Publicly traded Harbinger Group shares have risen over 80% in 2012 -- even after Thursday's secondary offering announcement -- as the company continues to expand its operations and refinance into lower-cost debts. In November, Harbinger Group paid $373 million for a 75% stake in a natural gas joint venture with Exco Resources (XCO). In 2011, the holding company acquired Fidelity & Guaranty Life Holdings from Old Mutual of Britain and a year earlier, the firm took a controlling stake in Spectrum Brands (SPB). Thursday's filing of a secondary offering names three Harbinger Capital funds -- Harbinger Capital Partners Master Fund I, Ltd., Harbinger Capital Partners Special Situations Fund, L.P. and Global Opportunities Breakaway Ltd. - as selling shareholders. A press release outlining the offering states the selling stockholders have also granted the underwriters an option for 30 days to purchase up to an additional 3,000,000 shares. Jefferies (JEFF) is serving as book runner on the offering and Cantor Fitzgerald is the co-manager. Follow @agara2004 -- Written by Antoine Gara in New York
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV