News about Daniel Och insider selling a sizeable chunk of his stocks in Och-Ziff Capital Management Group LLC is on the radar, particularly in the hedge fund world. In 1994, Daniel Och founded Och-Ziff Capital Management Group with $100 million initial investment from the Ziff brothers.
Daniel Och is a big fish in a big pond. In February 2014 Forbes listed Daniel Och as one of the 25 Highest-Earning hedge fund managers in 2013. The billionaire hedge fund investor has an estimated net worth $3.2 billion USD.
“Daniel Och insider selling a sizeable chunk of his stocks in Och-Ziff Capital Management Group LLC is on the radar”
It is no surprise that news about Daniel Och insider selling stocks has got investors pondering
What could be motiving a Wall Street titan to sell stocks in his own company?
Daniel Och insider selling would typically be interpreted as a bearish signal for Och-Ziff Capital Management stocks.
When board directors or founding members of a company sell stocks in the business they own or manage investors for good reason start doubting the future profitability of the company.
But surprisingly recent news about Daniel Och insider selling made the company’s stocks take a moonshot. Indeed, the stock rose 25% on the news of insider selling.
So why did Daniel Och insider selling have a bullish impact on the stock price?
Daniel Och is a controversial figure
In September 2016, the U.S. government fined Och $2.2 million and the Och-Ziff fund $413 million for paying over $100 million in bribes to various African government officials.
“In September 2016, the U.S. government fined Och $2.2 million and the Och-Ziff fund $413 million for paying over $100 million in bribes to various African government officials”
What’s more Daniel Och pleaded guilty to a federal charge of conspiring to bribe officials in Africa and the firm agreed to pay $412 million to resolve Foreign Corrupt Practices Act violations.
A number of big investors panicked and pulled billions of dollars from the fund. The Och-Ziff currently manages $32.3 billion, down from $50 billion in 2005.
So news about Daniel Och insider selling was viewed by investors as a positive development.
The recent rally in the company’s stock price suggests that Daniel Och could be taking less of an active role in his own fund and investors are cheering the news. Put another way, the billionaire hedge fund manager with guilty corrupt practices is seen as a liability in his own fund.
Where there’s muck there’s brass and the hedge-fund world is no stranger to shady practices what’s more some players are just too big (and well connected) to jail. Take, for example, Steve Cohen (the king of hedge fund managers) who walked away from the biggest insider scandal of the century with a fist full of dollars.
“Och-Ziff’s founder and several former managing directors would sell 35% of their shares to Och-Ziff’s executive managing directors in the form of a new share class” – WSJ
But keeping with the plot the details of Daniel Och insider selling are somewhat scant.
The WSJ recently reported that “Och-Ziff’s founder and several former managing directors would sell 35% of their shares to Och-Ziff’s executive managing directors in the form of a new share class”.
We are left assuming that the new class of shares will have less or no voting rights, bearing in mind Daniel Och is planning to take “another back-seat from the hedge fund empire which he built.” Daniel Och is transferring his control rights to a wider group of shareholders.
So Daniel Och insider selling entails a part exchange for a “new share class” together with an undisclosed liquidation of his investment from Och-Ziff funds.
Daniel Och was eager to put a positive slant on the news
“The plan announced today is a positive outcome for the firm that underscores our collective focus on aligning incentives across the organization” said Daniel Och in a statement.
Daniel Och insider selling also means we can soon expect a chosen successor early next year.
Daniel Och is scheduled to give up his chairman’s seat on March 31, 2019. Wall Street veteran Robert Shafir is tipped to succeed Daniel Och as chief executive.
Nevertheless, despite the Daniel Och insider selling story, the Och-Ziff fund is struggling with investor redemptions in a post-quantitative easing world. The Och-Ziff fund’s current asset under management (AUM) is $32.3 billion amounts which $20 billion down from its 2005 high.
“The plan announced today is a positive outcome for the firm that underscores our collective focus on aligning incentives across the organization”
– Daniel Och
The challenge to keep investors loyal is not unique to the Och-Ziff fund. Bill Gross’s Janus Henderson Global Unconstrained Bond Fund also saw redemptions for a fifth consecutive month, totaling about $232m between June and July, bringing the fund’s total assets to $1.249bn. Janus Henderson Global Unconstrained Bond fund began the year with total assets of $2.217bn. So Bill Gross’s fund sheds 44% of its assets, which amounts to a sizeable $968m, over the year-to-date.
Moreover, Israel Englander, Millennium fund has extended its lock-up period which is intended to hold back a wave of investor redemption requests which follows in volatile market conditions.
Daniel Och insider selling might very well be a bearish signal
Insiders close to the business have an uncanny knack for seeing trouble before it actually happens and exit at the top.
On the upside, the Och-Ziff fund is also offered by JPMorgan Chase & Co and some say this could help bolster assets under management.
So as Daniel Och insider selling plan is implemented Och-Ziff is asking current and former executive managing directors to temporarily forgo distributions on their common shares to help pay down its debt. Public shareholders will be unaffected and continue to receive distributions on their common shares.
Daniel Och insider selling comes just before a reverse split. Och-Ziff plans to complete a 1-for-10 reverse split of its class A shares in early January.