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The Morning Brief: Third Point Could Score Big on Ally Financial IPO

Ally Financial, the former General Motors unit bailed out by the U.S. government, announced plans to go public. In the initial public offering, the U.S. government plans to sell 95 million shares for $25 to $28 each, reducing its stake from 37 percent to 17 percent, according to a regulatory filing. This could enable the government to raise up to $2.66 billion.

At least one hedge fund that could profit greatly from the offering is Daniel Loeb’s Third Point. In his year-end letter to clients, he said he has invested across the capital structure of Ally Financial, the former GMAC. He said the financial giant “fits the pattern of other profitable investments” he has made. It has a highly successful, nearly-completed restructuring that remains undervalued, “with an explosive earnings story led by a talented management team who are economically aligned with shareholders,” he states.

Loeb said he initially invested in Ally in 2011 in its unsecured debt and preferred securities. In January Loeb said he had acquired 9.5 percent of the company in a series of private transactions over the recent six-month period. When he was still publicly disclosing his top holdings each month, Loeb said multiple securities held in Ally Financial were among his top five positions as long ago as the end of March 2013.

A handful of the high profile momentum stocks favored by some hedge funds, especially the Tiger Cubs and Seeds, fell sharply again on Thursday. Shares of Tesla Motors fell 2.70 percent and are now down more than 18 percent from their high, although they are still in the black for the quarter. Netflix fell about 2.2 percent on Thursday, Workday fell nearly 1.9 percent and Google dropped 1.6 percent. However, Facebook rose about 1 percent.

It looks like Clinton Group does not get as much respect as the other activist hedge funds. Shares of Nutrisystem dropped nearly 6 percent Thursday, several days after the New York hedge fund urged the weight-loss company to buy back stock or consider a leveraged buyout. It now trades at its lowest price since the beginning of March.

Shares of J.C. Penney continued their recent surge, jumping another 2.39 percent to close at $8.98. The stock is now up nearly 80 percent from its February 4 low.

Farallon Capital Management sold more than 3.5 million shares of Hudson Pacific Properties in a registered public offering completed earlier this week. This reduced the San Francisco hedge fund firm’s stake in the real estate company to 13 percent.

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