market folly

John Paulson's investment firm Paulson & Co recently filed a Form 4 with the SEC disclosing that they had sold over 1.1 million shares of Delphi (DLPH) at a price of $31.96 on March 5th.

Despite these sales, Paulson still owns a lot of DLPH. Their Credit Master fund owns 19.2 million shares as the company emerged from bankruptcy and became publicly traded again.

Their Recovery Fund also owns over 3.3 million shares while their Advantage Master fund owns 877k shares and their Advantage Plus Master fund owns 1.4 million shares.

Prior to its IPO, Delphi was owned by many hedge funds we track. During the IPO process, it was reported that Paulson would be selling about 20 million shares of its stake. Delphi continues to be one of Dan Loeb's biggest holdings.

Per Google Finance, Delphi is "is a global vehicle components manufacturer and provides electrical and electronic, powertrain, safety and thermal technology solutions to the global automotive and commercial vehicle markets. It is a vehicle component manufacturer, and its customers include the 25 automotive original equipment manufacturers (OEMs) in the world."


Paulson on Their Delphi Stake

In a letter to investors, Paulson & Co talked about their Delphi stake:

"Delphi, the largest U.S.-based automotive parts supplier, emerged from bankruptcy in late 2009. We believe bankruptcy reorganization transformed this previously troubled manufacturer into one of the auto parts industry's most efficient companies. In bankruptcy, many of the firm's liabilities were eliminated and its cost structure was drastically reduced, which we believe will likely lead to higher profits and a higher valuation.

Upon emergence from bankruptcy, Delphi's defaulted secured debt was exchanged for privately traded partnership units. The partnership units initially traded at $5000 per unit, had minimal analyst coverage, and required signing a confidentiality agreement to receive financial information. As the security was unlisted, illiquid, and complicated, it was little understood by the market and traded at a wide discount to Delphi's public equity comparables.

Delphi completed its IPO on November 17th, 2011. Paulson sold ~20M shares across our funds for $22 per share, yielding total proceeds of $453 million. We remain the largest shareholder in the company and believe that Delphi is taking the correct steps to remove its valuation discount to peers, including participation at the Detroit Auto Show, and initiating discussions with sell-side research."


Check out more activity from the hedgie: Paulson's presentation on Hartford Financial Services Group (HIG) as well as the catalyst for NovaGold (NG) shares.