Man Global Crushed - TheStreet

Man Global Crushed

Shares tumble in the latest hedge fund IPO debacle.
Publish date:

MF Global


, the U.S. brokerage arm of hedge fund giant Man Group, sank 8% on its first day of trading as investors' appetites for alternative investment firms continue to sour.

MF Global sold 97.4 million shares at $30 apiece Wednesday evening. The price was well below the initial range of $36 to $39 a share.

Early Thursday, the stock opened below its IPO price, at $29.37, and has been falling ever since. At midafternoon, shares were down $2.35 to $27.65.

Market participants are pointing fingers at the IPO's book runners, suggesting that the deal was mispriced.

"I heard that there were deep concerns over valuation," says Sal Morreale, an institutional trader at Cantor Fitzgerald. "That is why the deal didn't work."

In any case, big alternative investment firms haven't done well in the stock market this year.


(BX) - Get Report

has had a lackluster showing since its IPO last month. After pricing at $31, Blackstone's stock jumped 13% on its first day of trading. But it has since dropped sharply and on Thursday was down 5% to $27.07.

Fortress Investment Group


, which came public in February, remains above its IPO price of $18.50 but has given back much of its early gains after a first-day close of $31. Shares traded at $22.40 Thursday.

The moves don't bode well for other hedge funds and

private-equity firms considering public offerings. Both Kohlberg Kravis Roberts and the Carlyle Group are said to be considering IPOs.

Och-Ziff, an investment manager founded in 1994 by Daniel Och and the Ziff family, filed preliminary documents with the

Securities and Exchange Commission

earlier this month for an IPO that would aim to raise around $2 billion.

"This unfortunately is going to weigh very heavily for Och-Ziff and KKR," says David Menlow, the president of in Milburn, N.J. "We could see cancellations of these offerings or postponements."

"People are not liking these kinds of deals," Menlow adds. "They have too much power in their ability to shift market psychology. This doesn't have anything to do with the fundamentals of the company."

Menlow said pricing aside, MF Global is a sound company and investors should appreciate the fact that there will be more "transparency" in the business as it goes public.

"This is a securities firm," he says. "They're going to be probably giving

earnings guidance and ... end up having conference calls. I don't see either one of those happening" with Blackstone or Fortress, which structured their IPOs so investors have no claim on their operating companies.

Man Group has granted underwriters the option to purchase up to 9.7 million additional shares in the offering.

The hedge fund is also planning to publicly offer shares in a long/short investment vehicle to be based in Chicago known as Man Dual Absolute Return Fund.

Man said in a May IPO filing that Man Financial and two employees received so-called Wells Notices from the Commodity Futures Trading Commission alleging that it falsified the dates of certain trades conducted in 2004. Man Group had said in the filing that it "strongly" disputes the allegations.

A spokeswoman for MF Global did not return a call seeking comment.