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Here's Why Och-Ziff Capital Management Is Soaring Today

By Matthew Frankel, CFP® - Dec 7, 2018 at 3:57PM

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Despite a 600-point plunge in the Dow, this hedge-fund firm’s stock is up nearly 20%.

What happened

The stock market is getting absolutely pummeled this week, but there are some bright spots. One of them is Och-Ziff Capital Management Group ( SCU 0.77% ), the largest publicly traded hedge-fund firm in the United States, also known as "Oz."

As of 3:20 p.m. EST on Friday, the stock was sharply higher -- up about 18% on the day. This follows a sharp upside spike on Thursday. In all, the stock is up by more than 40% over the past two days.

Businessmen surrounded by monitors showing financial charts

Image source: Getty Images.

So what

The reason for the move is a strategic plan announced by the company on Thursday before the market opened. Here are the major highlights:

  • Och-Ziff is planning a 1-for-10 reverse split for the stock.
  • Its tax classification is changing from a partnership to a corporation.
  • It plans to pay down debt and restructure in order to reduce its leverage. Current and former executive management directors are temporarily foregoing distributions in order to help the company pay down debt, and certain changes will be made to tax receivables and preferred debt.

Finally, chairman Daniel Och and several former executive managing directors plan to sell 35% of their shares to the company's current executive managing directors. Och also intends to redeem all of his liquid balances in the company's funds. This is likely seen as the biggest long-term positive, as it better distributes the company's equity and is intended to align the interests of the company's current management team with those of its shareholders. It also provides some clarity on Och's intentions in regards to his future role at the company.

Now what

The succession plan at Oz has been a big question mark for investors, so the announcement that Och is effectively planning to step away eliminates a big uncertainty. And the reduction of debt is almost always a long-term positive. It remains to be seen if these changes will result in meaningful increases to profitability, but this is definitely welcome news.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Sculptor Capital Management, Inc. Stock Quote
Sculptor Capital Management, Inc.
SCU
$18.26 (0.77%) $0.14

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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