I don't have any finance background so I could be off here but I'm thinking I might have figured out where Falcone is going with HRG. I don't remember the exact percentage Falcone owned of HR before the SPB acquisition but I think it was about 60%. So he owned ~60% of $140M cash before SPB. At a current market cap of $1.45B HRG's 54% SPB stake equates to $783M plus the $140M cash HRG has ~$923M in assets that Falcone owns something like 94% of.
Reading over the Insurance company 8K it doesn't look like Falcone currently owns it they just have some sort of right to purchase it that they are proposing to transfer to HRG. The purchase price for the Insurance company is $350M and the 8K states HRG is exploring a number of ways to finance it including equity.
I'm kind of guessing with HRG now seeded with ~$900M+ assets equity financing for companies Falcone doesn't already own will be a lot easier and maybe this is Falcone's angle with HRG. Using it to buy attractive companies with at least some substantial equity financing. I think ultimately he still needs HRG to appreciate in value to benefit which should also benefit minority shareholders. I'm not sure how independent our independent board members are but they in theory at least should protect minority shareholders from Falcone transferring a disproportionate amount of the value of HRG to himself. I've got a handful of shares bet on it anyway.
Not a bad thesis...I originally thought that he was hoping HRG would decline in price like it has so he could buy the rest of it and essentially get back the same shares of SPB that his hedge fund owned at a discount. However, buying this insurance company complicates things and makes it more likely that he wants to keep it a publically traded company and be content with managing the insurance float to increase shareholder value that way. Either way, I think there's a floor in the price of the stock since if it goes down any more, it would make too much sense for him to just scoop up the rest of it.
He strikes again. This looks like it puts a bit of a crimp in my equity financing theory. I still think there is something about the public holding company status of HRG vs. his hedge funds that enables him to do financing for acquisitions that he can't do through the hedge fund. It's not my area of expertise and more of a gut feeling than anything else but I think there is some sort of financing advantage to HRG being public and that's Falcone's angle here.