LPL stock rocked by investor's plan to cut stake

Private equity shop Hellman & Friedman sets 8.1 million share distribution

Nov 13, 2012 @ 2:02 pm

By Bruce Kelly

The share price of LPL Financial Holdings Inc. Ticker:(LPLA) took a hit Tuesday after the company reported that one of its main private-equity investors intended to reduce its stake in the independent broker-dealer.

Three funds managed by Hellman & Friedman LLC plan to distribute 8.1 million shares of LPL's common stock held by them to their “respective limited partners,” or investors, according to a filing with the Securities and Exchange Commission.

The share price of the company, which began trading publicly two years ago, dropped to as low as $23.17 this morning after closing on Monday near $28 per share. By afternoon, the share price bounced back to around $27.

Earlier this year, LPL said that its private-equity owners, Hellman & Friedman and TPG Capital LP, would sell $510 million in company stock in a secondary offering. Most of the shares sold in LPL's November 2010 initial public offering were controlled by longtime employees and brokers with the firm.

A company spokeswoman, Betsy Weinberger, said: “After this distribution, Hellman & Friedman remains a large shareholder with 17% of shares outstanding and will retain its two seats on our board. We value their continued partnership with LPL Financial."

The private-equity distribution drove the “meaningful share decline,” noted Alex Kramm, an analyst at UBS Investment Bank.

The company's “shares were down as much as 18% this morning on the disclosure that private equity investor Hellman & Friedman was distributing 8 million shares [30% of its holding, and 15% of the float] to its [limited partner] investors,” Mr. Kramm wrote in a research note Tuesday. “With [limited partner] investors likely selling their distributed shares in the open market, significant private-equity ownership remaining, and fundamentals continuing to be challenging, we see more downside risk for the stock, particularly now that it has recovered a bit from its lows.”

Mr. Kramm noted that the significant private equity ownership of LPL shares “creates overhang” for the stock, and that the “combination of a challenging macro environment, continued margin pressure and increased scrutiny by investors could drive incremental downside.”

His rating of the stock was unchanged at a “sell,” with a price target of $25 per share, also unchanged.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Why advisers are pessimistic about the economy

Deputy editor Bob Hordt and senior research analyst Matt Sirinides discuss a recent InvestmentNews survey of advisers, most of whom see a recession ahead before the next presidential election.

Latest news & opinion

John Bogle, Vanguard founder, dies at 89

The pioneer of low-cost, passive investments died of cancer.

10 biggest breakaways of Q4

Echelon Partners lists the 10 biggest adviser moves out of wirehouses during last year's final quarter.

6 biggest RIA acquisitions of 2018

As M&A involving registered investment advisers hit another record last year, these six deals topped the list

Anatomy of an annuity buyout offer

Readers are invited to comment on whether the columnist should keep or ditch her Ohio National VA contract

Factions emerge in OneFPA overhaul

Critics fear the FPA is trying to take money and power from local chapters, which officials and proponents call overblown.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print