Hedge Fund Star Chase Coleman's Facebook Trade Generated $1 Billion
Nathan Vardi, Forbes Staff
Following the money trail
Business
In the last three or so years, Facebook has captured the attention of the investment world like few other companies. Even before its shares were publicly traded, investors like Goldman Sachs maneuvered to buy the stock of the social networking company in private transactions. When Facebook finally conducted one of the most hyped initial public offerings in history in May 2012, the demand from investors was so high that the company expanded the IPO and raised $16 billion. The event, however, ended in disappointment for many as the stock sunk, erasing $50 billion of market capitalization in a few months. Then, starting in September and all through the fall, Facebook’s shares staged a stunning comeback, providing an incredible return for whoever dared to buy them in the summer. Lately, the stock has been trading in the $26 range, about 26% lower than its IPO price.Through it all, nobody traded Facebook better than Chase Coleman, the 37-year-old New York hedge fund manager who runs Tiger Global Management. In a Securities & Exchange Commission filing on Thursday, the firm disclosed that it had sold all of its shares in Facebook. In all, Coleman’s $11.5 billion investment firm probably made more than $1 billion in profits for its investors from Facebook. A spokeswoman for Tiger Global declined to comment.
Coleman first invested in Facebook mostly through venture capital vehicles he set up at Tiger Global Management, purchasing Facebook shares in private transactions. The investment was conceived and executed with the help of Lee Fixel and Scott Shleifer, key portfolio managers at Tiger Global. Coleman also bought some of his Facebook stock through his Tiger Global hedge fund, which he co-manages with Feroz Dewan. On the eve of the Facebook IPO, Coleman’s investment funds owned nearly 54 million Facebook shares. Forbes estimated last year that Tiger Global’s initial purchase price was in the $200 million range, but the firm never commented on the estimate. It may have been higher—but even at $400 million it seems like Coleman and his team generated a $1 billion profit.
Getting in early was one shrewd move for Coleman, but the other smart thing he did was sell a lot of his Facebook stock in the IPO. He made the decision to sell big time in the IPO well before Mark Zuckerberg showed up to the roadshow wearing a hoodie. Facebook’s chief financial officer, David Ebersman, made Coleman’s initial large sale possible by expanding the size of Facebook’s IPO at the last moment in the face of insatiable investor demand. Ebersman, it seemed, expanded the offering specifically because he wanted to manage future stock selling coming from Facebook employees and the company’s early investors. In total, Coleman sold about one-third of his holdings, more than 19 million shares, in the May IPO for a net $37.6 each, collecting some $715 million.
Early investors like Coleman were restricted from selling their Facebook shares until the middle of August, when some of those shares held by pre-IPO investors were released from lock-up provisions. Between the first lock-up release and the end of 2012, shares of Facebook traded for an average price of $22.36. They changed hands for as much as $28.24 before the end of the year. According to the recently filed SEC document, Coleman had completely exited Facebook by December 31. If he did so at an average price of $22.36, his investment funds would have collected another $770 million or so. A rough estimate then puts Tiger Global Management proceeds from Facebook stock sales at about $1.48 billion.
Coleman has been one of the most innovative and successful young money managers to burst on the scene in recent years. His hedge fund has posted net returns in excess of 20% for each of the last three years. Part of his success has been buying shares in hot tech companies prior to their IPOs, not just Facebook, but also companies like LinkedIn.
This article is available online at
Hedge Fund Star Chase Coleman's Facebook Trade Generated $1 Billion - Forbes
