No doubt hedge funds will play bigger role in Facebook’s stock after public IPO but these hedge funds made money on regulatory arbitrage of privately held stock
Christopher R. Hansen is a little-known hedge fund manager who likes to keep under the radar, but his Facebook investment is poised to make him a more high-profile player and is perhaps even helping to fuel his effort to buy a National Basketball Association team. His Valiant Capital Management, a hedge fund firm that he runs out of San Francisco, owns 36.3 million shares in Facebook, according to a Facebook filing with the Securities & Exchange Commission. At $35 per share, the top range of Facebook’s IPO pricing, Valiant’s Facebook stock would be worth $1.27 billion. Valiant probably paid $500 million for the shares, maybe he paid a bit less. Hansen, 44, has experienced something of a Facebook effect. He only founded his hedge fund a few years ago, in 2008, after working at Blue Ridge Capital, the hedge fund of John Griffin, who like Coleman is a Tiger Cub who used to work for the legendary hedge fund investor Julian Robertson.
Hansen bought Facebook stock through Valiant Capital Opportunities, a corporation that California business records show was formed in July 2010, just around the time that a relatively large amount of Facebook stock became available. Most of Valiant’s shares of Facebook are held in a special purpose vehicle that its hedge fund investors needed to opt into as co-investors by funneling some of the money they had committed to the hedge fund; the rest of the shares are held in a side-pocket of the hedge fund, according to an individual familiar with Valiant’s structure. Facebook facilitated the deals between Valiant, which the company viewed as an acceptable investor that would not quickly flip the shares, and holders of Facebook shares, using its right of first refusal on transactions involving its private stock.
Valiant’s new registration papers filed with the SEC suggest that the Facebook investment has been enormously important to Hansen’s hedge fund firm, which reported $3.26 billion of assets under management as of February 2012. At the top range of Facebook’s IPO price range, the Facebook investment would represent about 39% of Valiant’s assets under management. Valiant’s most recent SEC filings said its hedge fund held $831 million of publicly-traded stocks with Apple and Google being its largest holdings by far at $119 million and $83 million, respectively. Hansen and Valiant declined to comment.
Lots of big institutional money has bought into Facebook prior to the IPO, making money from regulatory arbitrage to produce large fortunes.
Second hedge fund manager who bought Facebook in early is Charles “Chase” Coleman, who bought Facebook not through his $6 billion Tiger Global, but with money he raised in vehicles that are registered as venture capital funds, like Tiger Global FB Holdings, which have nothing to do with his hedge fund. Coleman’s Facebook investment is worth $1.7 billion at the top end of Facebook’s IPO pricing range. Hansen and Tiger Global investment pros appear to travel in similar circles. In October, Hansen participated in a Q&A session at a Boulder, Colorado, investment conference that also featured Scott Shleifer, co-portfolio manager of private equity at Tiger Global Management.
Peter Thiel, of course, is a big investor in Facebook and one of its directors. But it’s his venture capital fund, Founders Fund, that got to participate in the Facebook bonanza. His hedge fund, Clarium Capital Management, did not buy into Facebook and has floundered. Other hedge funds, like SAC Capital, reportedly bought in, but not in the large way that Valiant did.
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