Follow the Money: Plundered Fortress

Those are performance fees that the principals have already pocketed from Fortress' private-equity and hedge funds, based on forecast returns. If the funds fall short of those forecasts, the principals may have to give some or all of that money back.

Now, thanks to the IPO, the money will come from the public company.

The obligations don't end there.

Even after the IPO, the principals will still own somewhere between 68% and 78% of the business, in the form of special units in the operating company. When the principals exchange these units in the future for ordinary shares, Fortress ought to get a tax benefit. The new shares, after all, will have a much higher tax-cost basis.

But according to the prospectus, whenever an exchange occurs, Fortress Investments has to hand over 85% of any tax benefit to the principal.

In cash.

As no one knows the value that shares will have when this occurs, you can't put a number on that obligation right now. But a fascinating footnote reveals just how big it may be.

The Nomura transaction alone, on a pro forma basis, raised the cost basis by $945 million. And that involved exchanging units for just 55 million new shares.

The amount of equity still to be exchanged: six times as much.

All of which is great news for people at the top of the company. The five principals own stock that is today valued at around $10 billion. There's another 51 million shares being handed out to key employees in the IPO. Value today: another $1.6 billion.