NEW YORK (TheStreet) -- Shares of Och-Ziff Capital Management Group (OZM) were down sharply today on the heels of news that the company is under investigation by the U.S. Department of Justice and had received subpoenas from the Securities and Exchange Commission for its dealings with Libya's sovereign wealth fund in 2007, according to published media reports. The firm has been under investigation since 2011.
Och-Ziff revealed the investigation in a 10-K filing released yesterday, although the filing made no specific reference to Libya. According to the filing Och-Ziff is under investigation for potential breaches of the Foreign Corrupt Practices Act which prohibits the bribing of foreign officials.
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From the filing: "Beginning in 2011, and from time to time thereafter, we have received subpoenas from the SEC and requests for information from the U.S. Department of Justice (the "DOJ") in connection with an investigation involving the FCPA and related laws. The investigation concerns an investment by a foreign sovereign wealth fund in some of our funds in 2007 and investments by some of our funds, both directly and indirectly, in a number of companies in Africa. At this time, we are unable to determine how the investigation will be resolved and what impact, if any, it will have. An adverse outcome could have a material effect on our business, financial condition or results of operations."
The investigation has hurt shares today with Och-Ziff shares down as much as 5.2% on Wednesday.
State owned investment firms like the Libyan Investment Authority are considered foreign officials by the U.S. government
TheStreet Ratings team rates OCH-ZIFF CAPITAL MGMT LP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate OCH-ZIFF CAPITAL MGMT LP (OZM) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 16.6%. Since the same quarter one year prior, revenues rose by 48.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 229.41% and other important driving factors, this stock has surged by 53.62% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- OCH-ZIFF CAPITAL MGMT LP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, OCH-ZIFF CAPITAL MGMT LP turned its bottom line around by earning $1.46 versus -$2.24 in the prior year. This year, the market expects an improvement in earnings ($1.55 versus $1.46).
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Capital Markets industry. The net income increased by 286.4% when compared to the same quarter one year prior, rising from $50.67 million to $195.79 million.
- The gross profit margin for OCH-ZIFF CAPITAL MGMT LP is rather high; currently it is at 62.45%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 18.27% trails the industry average.
- You can view the full analysis from the report here: OZM Ratings Report