Delphi Automotive (DLPH) launched Wednesday night in a $530 million IPO. Shares were initially priced at $22 each and 24.1 million shares were placed on offer reports MarketWatch. “Goldman Sachs Group (GS +0.76%) and JPMorgan Chase & Co. (JPM +0.20%) managed the offering, and none of the proceeds will go to the company.” A lot of it actually goes to John Paulson.
John Paulson Reduces Stake in Delphi
According to the Financial Times, “In Delphi’s 24.1m share offering, Mr Paulson sold 20.5m shares, with several smaller investors also selling. Delphi itself sold no shares.” The 3.6 million shares that underwriters have set aside to sell later will also come from Paulson’s stake. Paulson retained a 15.8% stake in Delphi after the initial sale. Prior to offering up his shares, Paulson had owned 22% of the company. MarketWatch reports, “Paulson on Thursday sold off a big chunk of his stake in the car-parts maker, which he garnered by converting debt to equity during Delphi’s bankruptcy, at $22 a share. That’s a whopping $453 million payday on a $14 million investment.” The Financial Times writes, “Paulson & Co has come under scrutiny this year for a series of bad bets on financial stocks, such as Citigroup and Bank of America. It is facing redemption requests, but Mr Paulson has told investors that the fund has ample liquidity to meet them. Paulson & Co declined to comment.”
The Rise of Delphi and Early Hedge Fund Interest
Delphi had been a subsidiary of General Motors before filing for bankruptcy in 2005. John Paulson’s Paulson & Co was just one of several hedge funds that acquired large stakes in the company shortly thereafter. Elliot Associates, Silver Point Capital and Oaktree Capital also bought positions in Delphi early on. Together, these three funds own just under 30% of Delphi. The company came out of Chapter 11 bankruptcy in 2009. Since then, it has made significant headway, cutting costs and adapting to industry trends in an effort to boost margins. Delphi was trading at $21.33 at 4pm EST.