NEW YORK ( TheStreet) -- Harbinger Group (HRG - Get Report), 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 - Get Report). 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 - Get Report). 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