Harbinger Capital Partners buys a 9.48% "passive stake" in Palm | webOS Nation
 
 

Harbinger Capital Partners buys a 9.48% "passive stake" in Palm

by Derek Kessler Wed, 14 Apr 2010 2:21 pm EDT

Philip Falcone, head of Harbinger Capital Partners

Palm announced today that hedge fund Harbinger Capital has purchased a 9.48% “passive stake” in the company. The purchase of 16 million shares, completed on April 12, equates to an investment of approximately $83 million at Monday’s stock price. The passive stake is one with no voting powers, otherwise this large of a share would have given Harbinger significant influence over the executive board of Palm. It is worth noting that this stock purchase is of common stock (the kind traded on the New York Stock Exchange) and does not represent an additional cash infusion for Palm.

Harbinger Capital Partners specializes in what they call “event/disaster strategies.” Their investment strategy revolves around putting money into companies they view as perched to experience significant growth and in companies that have fallen on hard financial times. Either (and both) could be used to describe their investment in Palm. Harbinger is headed by Philip Falcone, a billionaire who made his fortune from hedge fund management. The firm has made significant investments in the technology sector, and is actively engaged in the purchase and development of 4G wireless technologies. Last month Harbinger purchased satellite communications firm SkyTerra for nearly $262 million, and plans to spend as much as $4 billion building LTE network infrastructure to lease to American cellular carriers. As such, the 16 million share purchase of Palm stock is a drop in the bucket compared to how much Harbinger throws around on a daily basis.

What this means for Palm is nearly as complicated as what Elevation Partners’ investments in the company meant (Elevation Partners currently owns 30% of Palm). While Harbinger does not hold a voting stake in Palm, they can still exert significant influence on how the company is operated. It is worth noting that there are two other areas in which Harbinger invests: corporate shorts and value investments, both of which are passive investments, and have polar opposite opinions of the investment. Corporate shorting revolves around the borrowing and sale of shares that are believe to be overvalued, followed by the purchase and return to the lender of the shares at lower cost. Value investment is the more positive of the two, “where Harbinger believes a positive catalyst for value realization is already present” and the stock is poised to ride higher.

Given recent developments, we see the last option as the most likely. Even if it's just Harbinger riding Palm shares into the takeover sunset and reaping a healthy profit, they see the stock value on the rise and want to take advantage of it. As speculated by StreetInsider.com, Harbinger also has the option to convert their passive stake into a vocal one should they not like what they see, and with the billions of dollars they have to play with, Harbinger could even make a bid for Palm themselves and take the company private.