Fortress Investment Group’s decision to retain its dividend for the fourth quarter has resulted in its share price dipping below $1 on Monday for the first time since its February 2007 public listing.
The US hedge and private equity fund manager said 19 December it would retain its fourth quarter dividend for “potential future investment opportunities”. The firm also elected to not pay a dividend in the third quarter of 2008 to build up its capital for future investments.
The firm's share price dropped as low as 98 cents Monday, before springing back to $1.08 near the close of the market.
Alan Rambaldini, an equity analyst with Morningstar, said he expects Fortress’ stock price to continue plummeting as long as the chaos in the financial markets persist. He said the firm has been hit with redemptions on its hedge fund business, and plummeting values of its portfolio companies on its private equity side.
Fortress’ management could elect to buy out the company and take it private as long as its share price continues to suffer. Rambaldini said he doesn’t believe the firm is in danger of bankruptcy because the bulk of its debt doesn’t mature for two years and it has enough capital on hand to handle its debt load.
“I think delisting is a possibility,” Rambaldini said. “What it’s trading for now, it wouldn’t be a big investment for them to be able to buy it out.”
Fortress has suffered in the turmoil of the recession. Its stock initially soared after the firm went public, rising from $18 to range between $26 and $30 a share. Fortress’ shares began to dive in the fall of 2007, when its third quarter earnings report showed a $38 million net loss.
The firm reported a 78 percent third quarter drop in private equity fund pre-tax distributable earnings to $18 million compared to the $82 million earned during the same period in 2007.
Earlier this year, Fortress held a roughly $500 million first close on its sixth core private equity fund. The firm has not disclosed the target for the vehicle, but its fifth buyout fund closed on $5 billion last year.
Fortress did not return a call for comment.