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Pirate Walks the Blank

Pirate Capital, a $1.8 billion hedge fund with a reputation for shareholder activism, wants your money.

The 4-year-old hedge fund filed a registration statement late Tuesday to raise $100 million in an initial public offering for a newly formed "blank check" company called Doubloon Corp. The Norwalk, Conn.-based hedge fund says Doubloon will raise cash from investors to buy an existing financial services firm, or even another hedge fund.

Over the past three years, there has been a wave of blank check IPOs, in which a company raises money in public markets before deciding precisely what to do with it. Hedge funds have been the main investors in the deals, and Wall Street has marketed blank checks as a relatively safe way for hedge funds to invest in private equity. Investors in a blank check IPO are guaranteed to get back most of their money if the company can't find a suitable business to acquire within 18 months.

Most of the people forming blank checks are former corporate executives who are able to sell investors on the strength of their resumes and business acumen. In May, for instance, Michael Gross, who helped found the $10 billion private-equity outfit Apollo Management, debuted as the pitchman for Marathon Acquisition, a planned $300 million blank check IPO.

But the Doubloon IPO is the first blank check company fronted by a hedge fund with the stature of Pirate. Maxim Group, a small investment bank that has become a big player in blank check IPOs, is the underwriter on the deal.

Pirate Capital, led by Thomas Hudson, Jr., a former Goldman Sachs (GS - Get Report) portfolio manager, will own about 20% of Doubloon after the IPO. The hedge fund, which is renting space to Doubloon at a fee of $7,500 a month, will own its equity stake through an affiliated entity.
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