market folly

Shares of American Capital (ACAS) were up 5% yesterday after it was revealed that John Paulson's hedge fund Paulson & Co would be buying a 13% stake in the company. This capital will be used to help restructure ACAS' $2.4 billion of debt. They were in need of an infusion, and they certainly got it.

Paulson picked up shares in a $295 million stock offering that was priced at $5.06 per share, a slight discount to where shares ended last week. Paulson will scoop up the vast majority of the offering as his firm buys 43.7 million of the available 58.3 million shares. This should make John Paulson's hedge fund the largest shareholder in ACAS. In terms of other recent investments out of the hedge fund, we recently saw them buy shares of NovaGold Resources (NG) and you can always view the rest of Paulson's portfolio here.

Todd Sullivan over at ValuePlays.net has been long shares of ACAS even before Paulson and obviously can't complain when a prominent investor starts buying shares too. While Sullivan isn't managing $32 billion like Paulson, he recently started his own hedge fund, Pennant Fund LP along with Doug Estadt and they were up an impressive 48% for the first quarter of 2010. John Paulson's various hedge funds have had mixed performance thus far this year. His Advantage Plus fund was -1.18% for the year as of February, his Advantage fund -0.93%, his International fund up 0.47%, his Credit fund up 3.35%, and his Enhanced fund up 0.99%. All of these were noted in our first quarter 2010 hedge fund performance update.

Taken from Google Finance, American Capital is "an equity firm and a global asset manager. The Company invests in private equity, private debt, private real estate investments, early and late-stage technology investments, special situation investments, alternative asset funds managed by the Company and structured finance investments."

For more on John Paulson's hedge fund, head to Paulson & Co's portfolio and of course our in-depth look at their new gold fund.