Phil Falcone has a good sense of timing. His New York City-based Harbinger Capital Partners said in a regulatory filing on Wednesday it owns about 9.5 percent of the outstanding shares of Palm Inc., the money-losing cell phone maker.
News of Harbinger’s ownership of 16 million shares just happens to come after Palm’s stock surged 58 percent in just four trading sessions — from last Wednesday through Monday — before falling back 14.6 percent on Tuesday alone.
Alas, the stock surged more than 8 percent to around $5.58 around the time Harbinger’s filing was made public.
Palm has certainly been a hot topic of conversation on Wall Street of late. On Tuesday, Reuters reported that Palm may be acquired by China-based Huawei Technologies, the world’s second largest telecommunications equipment maker. Other companies, including Dell, have been rumored as would-be acquirers of Palm, which has reportedly lost market share to Apple’s iPhone and BlackBerry, made by the Canadian company Research in Motion.
As a result, Palm lost $732 million in its May 2009 fiscal year, its second straight annual loss.
So, when did Falcone buy all of his shares, or at least the ones that triggered the SEC filing? It is not clear. According to regulatory filings, his $8 billion hedge fund did not own any of the company’s shares on December 31, 2009.
Did he start buying in the first quarter? Well, according to SEC rules, investors with more than $100 million in total U.S. equities need to file portfolio positions at the end of each quarter, but not until 45 days after the quarter ends. So, we won’t know exactly whether Harbinger began buying shares in the first quarter until around May 15. And even then, we won’t know when be began buying, or at what price.
Here’s what we do know: All investors must disclose when they accumulate at least 5 percent of an individual stock within 10 days of passing that threshold in either a 13D or 13G filing. Harbinger’s disclosure regarding Palm is contained in a 13G, which is used for passive investments. If Falcone had filed a 13D, he would have been required to state the reason for his investment. (This is the filing usually reserved for potential activist investments, like the one Falcone made several years ago in The New York Times.)
In other words, Falcone simply thought that buying Palm shares was a good investment. He seemingly has no other intentions.
We can assume he bought the shares that put him over that 5 percent sometime since the beginning of April, given that 10-day period between buying and filing. Now Falcone’s timing is looking even better, given the stock surged in the past week or so.
In any case, Falcone most likely made a nice timely purchase of Palm stock around the time the shares were running up.
Nice job, Phil.
Stephen Taub, who has covered the hedge fund industry for 30 years, is a contributing editor to Institutional Investor and Absolute Return-Alpha magazines.
