Sometimes it is the holdings not contained in 13F filings that turn out to be the most interesting.
Case in point: Since AT&T closed on its $48.5 billion acquisition of DirecTV in late July, we have learned that one prominent hedge fund firm had been a sizable investor in both stocks for some time. It just didn’t want the rest of us to know.
Alec Litowitz’s Magnetar Capital recently disclosed it has owned shares of both companies since the June 2014 quarter. However, it only got around to reporting the extent of these positions in revised filings made on August 14, the same day June 2015 reports were due.
Wireless giant AT&T and satellite TV company DirecTV announced their megamerger in May 2014. The two stocks then became big plays among risk arbitrageurs and hedge fund firms that play deal stocks as they bet on whether or not regulators will approve the deal, and when. Arbs, as they are known, have also learned that in this bull market, shares of the acquiring company frequently go up along with those of the target — a break from past experience, where the target’s stock usually rose while the acquirer’s stock fell.
Until last week, Magnetar mostly kept its holdings of the two companies out of public view, presumably so as not to tip off others to its position. As we have previously reported, a number of firms take advantage of a Securities and Exchange Commission rule that allows them, if they receive permission, to delay disclosing sensitive key positions they are building. Some firms do this from time to time, while others — like Magnetar — regularly file a series of revisions each quarter when they file their regularly scheduled quarterly 13Fs, drawing on SEC regulations that explicitly permits risk arbs to seek confidential treatment.
In its 13F for June 2014, for example, Magnetar did not indicate it owned shares of either company. However, now we know from last week’s revised filings that it owned $103 million worth of AT&T stock at the time, or more than 2.9 million shares, and nearly $113 million of DirecTV, or more than 1.3 million shares. In the following quarter, it turns out, Magnetar owned $61.5 million worth of AT&T stock as well as put options but no longer held a position in DirecTV.
Interestingly, in the timely 13F filing for December 2014, Magnetar did disclose a very small, $245,000 stake in DirecTV. But it did not list AT&T as a holding. However, in the revised document, it also revealed owning $79 million of AT&T stock plus put options at year-end.
In the timely March filing, Magnetar finally disclosed a $90 million stake in AT&T but just $462,000 worth of DirecTV. However, in the revised filing it said that paltry DirecTV stake was really closer to $132 million. (It also disclosed a $130 million position in U.S. tobacco giant Lorillard, which in June was acquired by Reynolds American.) Finally, in the timely second-quarter 2015 report filed last week, Magnetar disclosed a $184 million position in DirecTV and just call and put options on AT&T’s stock as the deal’s close neared.
Interestingly, while Magnetar was building and holding its positions in AT&T and DirecTV in secret, other high-profile hedge fund firms did not feel the need to hide big stakes in those stocks. For example, John Paulson’s Paulson & Co. disclosed that DirecTV was its sixth-largest position for four of the past five quarters, with the firm owning 11.4 million shares worth nearly $1 billion for most of that time. Other fairly sizable investors in DirecTV over the past few quarters included D.E. Shaw & Co. and Taconic Capital Advisors.
