Absolute Capital Management, the London-listed hedge fund manager that has been under a shadow since the dramatic walk-out last September of co-founder Florian Homm and the subsequent disc
Absolute Capital Management, the London-listed hedge fund manager that has been under a shadow since the dramatic walk-out last September of co-founder Florian Homm and the subsequent discovery that the firm’s equity fund portfolios contained substantial levels of illiquid and hard to value micro-stocks, has experienced a fresh plunge in its share price.
The company’s shares dropped by more than 60 per cent on Monday after an extraordinary general meeting of shareholders held in the Cayman Islands approved a demerger of the Argo credit hedge fund business. At the close on Wednesday Absolute Capital had a market capitalisation of just GBP6.15m, down more than 98 per cent in 12 months.
The slump in Absolute Capital’s market value has been interpreted by the market as a sign that the company’s value lay mostly or wholly in the Argo fund management business and very little if at all in its battered original equity hedge fund activity.
In May three out of Absolute Capital’s eight equity hedge funds are estimated to have lost ground during a month when most hedge fund indices indicated an average gain of around 2 per cent across the industry. Another three of the Absolute Capital equity funds have not yet reported performance estimates.
Argo Capital was acquired by Absolute Capital in January 2007. Its former principals, Andreas and Kyriakos Rialas, are now the largest shareholders in both Absolute Capital and Argo Group with more than 33 per cent of the shares.
Following approval by the EGM of all the resolutions required to authorise the demerger of the Argo business, Absolute Capital will carry out the separation of the two companies by making a distribution of shares in Argo Group to its shareholders. Following this distribution, Argo will be owned independently, albeit by the same shareholders in the same proportions as Absolute Capital.
Absolute Capital’s ordinary shares continue to be traded on London’s Alternative Investment Market. Argo will initially be a private company, but the newly-independent firm intends to apply for its shares to be admitted to trading on AIM within six months, with Panmure Gordon acting as financial adviser.
The board of Absolute Capital Management Holdings has also announced that Jonathan Treacher has stepped up to become non-executive chairman, and that Glenn Kennedy has succeeded him as chief executive. Kennedy joined the company in December 2006 as general counsel and was appointed to the board of directors in February this year.
In a statement issued before the fall in the company’s share price, Treacher said: ‘We are delighted with the result of the EGM. The demerger of Absolute Capital and Argo Group is a significant step forward for both companies as they will now be in a stronger position to execute their own growth strategies and enhance overall shareholder value.
‘The appointment of Glenn as chief executive is a logical step forward for Absolute Capital as we continue to strengthen our management team to build a solid foundation for further growth and development.’