Twenty years ago, Paul J. Glazer launched his own merger arbitrage hedge fund, which he called Glazer Capital. The fund, which has $1.3 billion in AUM (as of June 6th, 2017) is headquartered in New York City, and it was registered with the US Securities and Exchange Commission as an Investment Adviser in 2006. Paul Glazer is the fund’s CEO and Chief Investment Officer, and he has more than 30 years of investing experience. Before starting Glazer Capital, Paul Glazer honed his investment acumen first at Houlihan, Lokey, Howard & Zukin, Inc., where he was a financial analyst, and then at Jefferies & Company, where he was sharpening his skills in risk arbitrage. Later, he landed a job at Bear, Stearns & Co., where he was a Vice-President of institutional sales. From Bear, Stearns & Co, he moved on to Oscar Gruss & Son. He earned his B.S. in Economics from the Wharton School at the University of Pennsylvania.
Glazer Capital relies on merger arbitrage strategy or as it is also called risk arbitrage, which is event-driven investing (or trading) that aims to take advantage of market miscalculations just before or after a merger or acquisition. A merger arbitrageur must analyze the possibility of a merger not closing, because they usually invest just before the merger when the prices actually drop, aiming to benefit when the deal closes. Because of the mentioned possibility of a deal not closing a serious amount of risk is involved with this strategy, and that explains why it is often called risk arbitrage. In any case, just as with any other investment strategy, the fund that uses it develops its own mechanisms and tactics in order to minimize the risks, and achieve maximum profit. Glazer Capital tries to do the same, striving towards attaining uncorrelated absolute returns regardless of the market conditions by relying on its methodical investment approach and research guided methodology. On its website they quote Warren Buffet:
"Give a man a fish and you feed him for a day. Teach him to arbitrage and you feed him forever."
Let’s take a look at some of the Glazer Capital’s return figures in order to see how did this strategy turn out for it.
As reported on Bloomberg, Glazer Capital’s main fund gained 3% since January through April 14th in 2016, and for the entire 2015, it brought back around 12%. We managed to find more performance figures and details for Its Glazer Capital Management L.P., which generated a return of 2.44% in 2013, 2.54% in 2014, and a little bit higher 5.24% in 2015. It kept this positive performance in the following years as well, delivering 3.58% in 2016, and 2.64% in 2017. Last year, which posed difficulties to many hedge funds just to stay positive, Glazer Capital Management L.P. managed to do so bringing back 1.96% through October. It posted a total return of 325.26%, for a compound annual return of 7.6%. Its worst drawdown was of 2.65.
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In order to minimize the risks, Glazer Capital usually holds a diversified portfolio, and at the end of December 2018, the fund held around 150 positions, which gave its portfolio value of $723.86 million. This represented a decrease of 23.80% from one quarter earlier when its portfolio was valued $945 million. Because of its investment strategy that concentrates on the stocks in the process of acquisition, the fund had no interest in attaining a position in one of the 30 Most Popular Stocks Among Hedge Funds. Instead, Glazer Capital held the largest stake at the end of the fourth quarter of 2018 in Athenahealth, Inc. (previously NASDAQ:ATHN), which was worth $62.04 million, on the account of 470,231 shares outstanding. This was actually a new addition to its equity portfolio, and in the meantime, the company was sold out. More precisely, on February 11th, Athenahealth, a company that provides network-enabled services for ambulatory customers and hospitals across the US, completed its sale to an affiliate of Evergreen Coast Capital and Veritas Capital for around $5.7 billion in cash.
If you are curious to read more about other Glazer Capital’s fourth quarter positions, move on to the next page.
The second largest and also a new stake in Glazer Capital’s portfolio at the end of the fourth quarter of 2018, was in Pandora Media, Inc (previously NYSE:P), which is a company that offers a variety of music streaming services. The fund held 6.545 million Pandora’s shares, which carried a value of $52.95 million. On February 1st, the company was acquired by Sirius XM Holdings Inc (NASDAQ:SIRI) which, in that manner, became the largest audio entertainment company in the world. Sirius acquired Pandora for roughly $3.5 billion.
Among Glazer Capital’s fourth quarter positions that weren’t sold out in the meantime were:
GTY Technology Holdings Inc (NASDAQ:GTYH), which is a special purpose acquisition company, that is oriented towards companies from the technology sector (counting services and software). It has a market cap of $390.51 million, and it is trading at a price-to-earnings ratio of 143.90. Year-to-date, the company’s stock lost 20.06%, and on March 12th it was trading at $8.05. Glazer Capital reported a position in the company that counted 3.8 million shares, which carried a value of $38.19 million, accounting for 5.27% of its equity portfolio.
Vantage Energy Acquisition Corp Class A (NASDAQ:VEAC) - another special purpose acquisition company, which was formed with the intention of creating a premier pure-play operator. Over the last six months, its stock gained 2%, having its closing price on March 12th of $10.20. It is trading at a price-to-earnings ratio of 377.50 and has a market cap of $1.42 billion. The fund held $29.3 million worth a position in the company, on the account of 2.91 million shares outstanding.
Verizon Communications Inc. (NYSE:VZ), a multinational telecommunications conglomerate, which is based in the Big Apple, but is incorporated in Delaware. The company with a market cap of $237.10 billion is a corporate part of the Dow Jones Industrial Average. It is trading at a price to earnings ratio of 15.26, and over the last 12 months, its stock went up by 18.04%, having a closing price on March 12th of $57.43. In its last financial report for the fourth quarter of 2018, Verizon disclosed consolidated EPS of $0.47, versus EPS of $4.56 in 4Q 2017, and adjusted EPS, excluding special items, of $1.12, versus adjusted EPS of $0.86 in the corresponding period of 2017. For the full year 2018, Verizon reported EPS of $3.76 and adjusted EPS of $4.71, compared to EPS of $7.36 and adjusted EPS of $3.74 for the full year 2017. Its operating cash flow for the full year 2018 was of $34.3 billion, which represents an increase of $10 billion on a year to year basis. The fund initiated a position in Verizon during the fourth quarter, purchasing 125,000 shares outstanding, with a value of $7.03 million.
This article was originally published at Insider Monkey.