| Kenneth Griffin, Citadel (Bloomberg) |
’Tis the season for third-quarter 13F filings. As most investors and members of the financial media scrutinize the latest quarterly filings for nuggets of insights, several hedge funds are just now getting around to revising earlier filings.
As we have chronicled in the past, it is not too unusual for hedge funds to take advantage of a Securities and Exchange Commission rule that allows them to delay disclosing positions until they have completed their investment. Activists especially have become more sensitive to this need for fear of seeing shares of their newest target bid up before they finished buying.
However, passive players in deals also sometimes try to hide their positions, although I’m not certain why. No one is really watching them as closely as they may think.
A case in point is Kenneth Griffin’s Citadel, the Chicago-based multistrategy giant that in the second quarter listed no fewer than 11,384 individual entries in its 13F. No, this is not a typo. Granted, many of these entries were multiple positions for the same security. And many more were call and put options on the same common stock.
In any case, if ever there was a firm whose “hot” investments could be easily camouflaged like a version of Where’s Waldo?, it’s Citadel.
Yet several days before the deadline for filing 13Fs covering the September 2015 quarter, the hedge fund firm revised its quarterly 13F filings for three earlier periods. In each case, the firm appeared to be delaying the disclosure of investments in a half dozen or so companies involved in mergers at the time.
None of the deals were initiated by Citadel. Rather, they seem to be merger arbitrage plays.
Curiously, in most of the cases, Citadel had previously disclosed positions that wound up being much smaller than the revised stakes.
For example, the firm revised its June 30, 2015, filing to show six holdings valued at more than $530 million. In the initial timely filing, Citadel disclosed having very small positions in five of those six stocks, plus call and put options for them.
By far the biggest position in the new filing is in New York’s Pall Corp., a maker of filtration systems, accounting for nearly half the value. On August 31, Washington, D.C.–based Danaher Corp. completed its acquisition of Pall.
The other four stocks that now show larger positions are all health care companies — drugmakers and drug and medical device company Hospira, Kythera Biopharmaceuticals and Mylan, and pharmacy services provider Omnicare.
In early September, New York’s Pfizer completed its acquisition of Lake Forest, Illinois–based Hospira in a deal announced in early February.
In June, Dublin-based Allergan announced plans to acquire Agoura, California, biopharmaceutical company Kythera. The deal has not yet been completed. The deal was revised in early August to make it an all-cash deal.
Canonsburg, Pennsylvania–based generic and specialty drugmaker Mylan had been trying to acquire Perrigo Co., based in Allegan, Michigan, which rejected the offer a few days ago.
Meanwhile, in August, Woonsocket, Rhode Island’s CVS Health completed its acquisition of Omnicare.
In one case — Tulsa, Oklahoma, natural gas pipeline company Williams Cos. — the revised filing actually shows the hedge fund firm owned just a fraction of the initially reported position. Weird. The longtime activist target in late September agreed to merge with Energy Transfer Equity, based in Dallas.
Citadel also revised its March 31, 2015, quarterly filing to show it held much larger stakes in Hospira and Sigma-Aldrich Co., a St. Louis life science company, than it initially disclosed.
Alas, German drug and chemical company Merck & Co. announced its plan to acquire Sigma-Aldrich in September 2014.
Finally, Citadel also revised its December 2014 filing to show a sizable position in Sigma-Aldrich.
The moral here: This is yet another series of examples of how the 13F filings sometimes don’t tell the entire story, especially when it comes to holdings of the “hottest” stocks at a given moment.
