RAB capital, the one-time star of the hedge fund world which made an ill-fated bet on Northern Rock during the financial crisis, is to end its innings as a public company after being wounded by investors who have abandoned it in droves.
The firm outlined its plans to leave the Alternative Investment Market yesterday, just over a month after revealing that its assets were set to slump by more than previously anticipated. In April, it disclosed that its Special Situations Fund had been battered by a tide of requests from investors to withdraw their money, to the extent that redemptions would amount to 79 per cent of the value of the former flagship fund.
The sum total of third-party assets under RAB Capital's management is expected to sink below $200m (£125m) by October. All of this added up to one grim fact, namely that "the path for the company's return to profitability will be impaired relative to management's previous expectations", as RAB put it in May. The update set the ball in motion for the firm to delist.
Under yesterday's plan, investors in the fund, which before the credit crunch boasted assets of $7bn, compared with $1bn-odd under management at the end of December, will have the option to take either 10p in cash for each of their RAB shares or swap their holdings for unlisted stock in a new company that will be the ultimate owner of the troubled business.
The proposed buyout, which will move the firm into the ownership of the new company, is being led by the directors, Philip Richards, Christopher de Mattos, Michael Alen-Buckley and Charles Kirwan-Taylor.
RAB said the maximum payout to shareholders under the plan was likely to be £27m. The proposal marks a low for RAB Capital, which posted returns of more than 1,000 per cent in 2003. It reaped rewards by backing mining start-ups during a commodities bull run before the crisis.
But the turning point came when the firm, which counts the steel tycoon Laxmi Mittal's family among its investors, made the decision to invest in Northern Rock.
The Special Situations Fund, led by Philip Richards, bought into the bank after it said it was it running out cash. The hope was that the stock would recover as the Bank of England its extended support to the Newcastle-based lender. But the reality proved altogether more unsettling, both for the financial sector and RAB, when Northern Rock had to be nationalised, thus wiping out the investment.Reuse content