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Investment Analysis Clubs / Stereo 8


Subject:  Re: APO carry? Date:  4/24/2019  3:07 PM
Author:  EightTrack4 Number:  1755 of 1757

But their history over the last 5 years of my ownership makes me question my assumptions regarding their track record.

Five years is a long enough time for a stock to perform and I can certainly understand why you want to shift capital to other opportunities. Given Blackstone's C-Corp announcement this may be a good time to cut Apollo loose if you are so inclined.

Specifically, I wonder if their playbook for PE works today. ADT indicates maybe not. Does using a SPAC really make a difference? Isn't it still a public company with a bad balance sheet and a huge sponsor overhang?

I mentioned the SPAC example because it is an alternative to a traditional IPO. There is nothing inherent to a traditional IPO or SPAC that requires Apollo to bring debt-heavy companies to the market; at the very least they could require their portfolio companies to sell more equity in the IPO; Apollo can also stop doing dividend-recaps prior to the IPO or SPAC.

The advantage of a dividend-recap is that it gooses IRR and cuts LP exposure to the stock. But if enough investors sour on heavy debt loads, presumably Apollo can adjust. I think the history of Apollo reveals a degree of creativity.

Did Apollo bring ADT to the market too soon? Yes, and Leon Black would agree with you. Does that invalidate their process? I don't think so but you may disagree. I'm not even sure that ADT is going to be a loser for Apollo. Investors like Bill Miller are sniffing around ADT at this price; maybe they see something undervalued.

However, if you think Apollo's PE approach is past its sell date then it's time to get out.

Over time I came to the conclusion that online stock posters should not try to convince others to invest or stay invested. (No 'here's 5 reasons why Apollo PE will succeed' or '3 reasons Apollo is undervalued') when a fellow board participant is on the fence.

It's your decision; it's your money.

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