UPDATE: Ellington Financial Files For $200 Million Common Share IPO
July 14 2009 - 2:01PM
Dow Jones News
Hedge-fund manager Ellington Management Group's Ellington
Financial LLC subsidiary has filed to hold an initial public
offering as the specialty-finance company looks to raise money to
acquire new assets.
In its registration documents with the Securities and Exchange
Commission, Ellington Financial put the planned IPO's size at $200
million.
Ellington Financial, which will list its common shares on the
New York Stock Exchange with the symbol EFC, was formed with $250
million from its parent company in August 2007.
A spokesman for Ellington declined to comment, citing "quiet
period" rules surrounding IPOs.
Ellington Financial invests in residential mortgage-backed
securities, or RMBS, backed by subprime, "Alt-A" and other mortgage
loans. It also invests in both mortgage-related and other types of
derivatives.
In the IPO filing, Ellington Financial said it has delivered a
positive total return on capital since its inception in August
2007. However, investors may be wary of the risks associated with
the RMBS the company deals in as the real-estate market is still
struggling amid tight credit markets and high inventories.
Ellington Management, the parent, is considered a pioneer among
hedge funds that trade mortgage-backed securities. It was founded
in 1994 by Michael Vranos, former head of mortgage-backed trading
at Kidder Peabody. It ran into trouble in its funds last year,
along with most managers of mortgage-focused funds. After barring
withdrawals, Ellington split its main fund in two in order to
slowly liquidate hard-to-sell assets, and laid off some
employees.
Only three U.S. hedge fund managers have publicly traded shares:
Och-Ziff Capital Management Group LLC (OZM), Blackstone Group LP
(BX), and Fortress Investment Group (FIG).
For the quarter ended March 31, Ellington Financial's net
investment income jumped 61% to $6.3 million from a year earlier,
while its net realized gain on investments and hedging soared to
$19.8 million from $1.5 million. It realized a loss on investments
during the quarter amid stock-market volatility, but saw a big gain
on its derivatives.
Ellington Financial, which had announced in April its IPO plans,
said it would use the proceeds to acquire targeted assets within
six months of the closing of the offering. Remaining proceeds would
be used for general corporate purposes.
-By Joseph Checkler; Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353;
kerry.benn@dowjones.com