May 26 Post-IPO Quiet Period Expiry For Ares Management Opens A Cheap Window For A Solid Company; Underscoring Role of Underwriters

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BrokerDealer.com’s blog editor thanks Seeking Alpha for below extract; an independent analysis of alternative fund management firm Ares Management, which launched its initial public offering (IPO) on May 1. The analysis of this multi-strategy investment management platform was contributed by Don Dion, the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family.

Summary

  • The Quiet period on underwriter research on ARES will come to an end on May 26th, 25 days after the firm’s May 1 IPO.
  • ARES has had a rocky start on the market post-IPO after pricing well below the expected range and continuing decline, despite strong underwriting, management, and revenues.
  • Given ARES’ strong fundamentals, we suggest investors consider buying into the company as share price could temporarily increase, following underwriter reports.

The SEC-enforced quiet period on underwriter research on Ares Management LP (ARES) will come to an end on May 26th, 25 days after the firm’s May 1 IPO.

The expiration of the quiet period will allow ARES’ IPO underwriters to publish research reports on the alternative asset manager, likely leading to at least a temporary increase in the price of ARES shares.

Strong Underwriting Could Lead To Flood of Positive Reports

The firm’s lengthy roster of underwriters, including BofA Merrill Lynch, J.P. Morgan Securities LLC, Barclays Capital Inc, BNY Mellon Capital Markets LLC, BMO Capital Markets Corp, Citigroup Global Markets Inc, Deutsche Bank Securities Inc, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co, Imperial Capital LLC, Houlihan Lokey Capital Inc, JMP Securities LLC, Mitsubishi UFJ Securities Inc, Keefe Bruyette & Woods Inc, Morgan Stanley & Co LLC, SMBC Nikko Securities America Inc, RBC Capital Markets LLC, SunTrust Robinson Humphrey Inc, Wells Fargo Securities LLC and UBS Investment Bank, will attempt to breathe life into the stock by unleashing a wave of positive research on ARES at the conclusion of the quiet period.

Correlation Between Underwriting and Share Price

Both the results of recent academic studies and our own research over the past two years have provided empirical evidence of a correlation between the reputation and quantity of IPO underwriters and a rise in share prices with the expiration of the quiet period; ARES’ impressive list of underwriters should prove an asset at the end of the quiet period.

Share prices usually begin to rise a few days in advance of the expiration as aggressive investors purchase shares in order to take advantage of the upcoming underwriter reports. These early buys generate an atmosphere of rising demand, causing a rise in the price of shares before the underwriters have had the opportunity to publish their reports.

Overview of ARES Business

ARES is an alternative asset management firm, offering a variety of investment strategies to its growing investor base.

About the Analyst

Don Dion (donalddion@gmail.com) is the owner and Chief Investment Officer of DRD Investments, LLC, based in Naples, FL. and Williamstown, MA., a family office focused on managing a long/short hedge fund, real estate assets and various other financial assets for the Dion family. Don no longer manages money for other families or institutions.

Mr. Dion is also the trustee of the Dion Family Foundation which focuses on helping individuals with tuition assistance at Catholic Institutions for grammar school, high school and college education. The foundation also helps individuals by supporting health care institutions particularly Massachusetts General Hospital. Don is on two leadership and advisory committees at Massachusetts General Hospital, consults with Saint Dominic’s Academy and serves as a trustee of Saint Michaels College.

Mr. Dion is the retired publisher of the Fidelity Independent Adviser (http://www.fidelityadviser.com/) family of newsletters, which provides to a broad range of investor commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 30,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes two monthly newsletters and one weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 16 years and reaches over 25,000 subscribers.

http://seekingalpha.com/author/don-dion