Billionaire Dan Och's hedge fund is pennies away from raising a red flag at the New York Stock Exchange.
Shares of his Och-Ziff Capital Management Group LLC — one of the few publicly traded hedge-fund firms — have plummeted 97% since the firm went public, to a record low of $1.01 as of Monday. That's just 1 cent away from a key threshold for the exchange.
Companies on the NYSE risk being delisted when their shares trade at an average price less than $1 over a 30-day trading period.
It's a mortifying prospect for what was once one of the world's biggest hedge fund managers, and one that two years ago made headlines for its eye-popping, stock-based pay packages. And it adds to a mounting list of woes for employees — the company's biggest shareholders — since the firm first disclosed a regulatory probe in 2014 that triggered an exodus of client cash and a slide in Och-Ziff's stock price.
The delisting process isn't automatic once a company falls out of compliance with the exchange. A company has six months to fix its standing after receiving notification from the exchange, according to NYSE rules. That gives companies on the verge of being delisted an opportunity to do a reverse stock split, for example, which would reduce the number of shares outstanding, thereby increasing the per-share price. Och-Ziff would need the approval of its board to execute a reverse stock split.
An Och-Ziff representative declined to comment on whether the New York-based company would take steps to prevent being delisted. A spokeswoman for the NYSE, which is operated by Intercontinental Exchange, declined to comment on whether exchange officials already have held talks with Och-Ziff, citing company policy against discussing individual firms.
The tumble in the firm's share price and assets — withdrawals from Och-Ziff's multistrategy hedge funds have reached almost $25 billion since the end of 2014 — paired with a fumbled succession plan have weighed on morale and employee turnover, people familiar with the matter said.
Because Och-Ziff's senior managers received much of their compensation over the years come in stock, the company might opt to restructure its pay packages to keep key employees from leaving in the event shares are delisted, according to Dafina Dunmore, an analyst at Fitch Ratings.
Och-Ziff already renegotiated the payment agreement for its co-Chief Investment Officer Jimmy Levin earlier this year, to align it more closely to the funds' investment performance rather than the company's stock gains. Mr. Levin, who will become sole CIO at the end of this year, previously was awarded a pay package consisting of 39 million shares tied to stock returns. The award would've been worth north of $200 million if the company had met all its goals — one of the highest pay packages on Wall Street. With shares where they are now, those targets haven't been met.
Meanwhile, the firm's flagship hedge fund has fared better: It has returned an annualized 5% since 2007, vs. 3% on average for hedge funds.
