market folly

John Paulson's hedge fund firm Paulson & Co has just filed a 13D with the SEC and has disclosed a 17.4% ownership stake in SuperMedia (SPMD). The filing was made due to activity on December 31st, 2009 and they now own 2,607,506 shares. This is a newly disclosed stake for them as they did not show share ownership of SPMD when we previously looked at Paulson's portfolio. SuperMedia is the new name for Idearc, who recently emerged from bankruptcy.

Their position in SuperMedia does require some explanation as they didn't just solely purchase shares. Taken direct from the SEC filing, we see that "A total of $12,117,456 was paid to acquire shares pursuant to the Standby Purchase Agreement. Additionally, the Reporting Persons (Paulson) paid a total of $455,895,831 for debt securities of the Issuer (SPMD) that was exchanged for cash, new debt securities of the Issuer and shares of Common Stock pursuant to the First Amended Joint Plan of Reorganization with the United States Bankruptcy Court."

So, we now see that back on November 18th, 2009 Paulson entered into a Standby Purchase Agreement. Paulson also entered into a Standstill Agreement whereby he can nominate one board director as long as his firm owns at least 20% of the outstanding shares. Paulson's potential ownership of common stock has also been limited to 45% of the outstanding shares and this agreement has a four year term.

Of the 2,607,506 shares Paulson owns, 4.7% of those are common shares purchased under the Standby Purchase Agreement and 12.7% of those shares were acquired upon the exchange of debt securities pursuant to the Plan. Got all that? For more information on Idearc's emergence from bankruptcy as the new SuperMedia, head to this press release.

This latest portfolio movement comes amongst the recent fanfare surrounding John Paulson's new gold fund which we covered extensively. Paulson of course has gained notoriety for his huge bet against subprime over the past few years where he made billions. Wall Street Journal columnist Gregory Zuckerman has detailed Paulson's amazing play in his new book The Greatest Trade Ever (see our review here).

Other recent portfolio activity out of hedge fund Paulson & Co includes doubling down on their Cadbury stake (CBY) and taking a position in Conseco (CNO). For more insight from Paulson, check out their third quarter investor letter. Lastly, you can also view the rest of John Paulson's equity holdings here.

Taken from Google Finance, SuperMedia (formerly Idearc Inc.) "serves as the advertising agency for small-to-medium sized businesses with a variety of advertising solutions."