Investment Managers, Negative News

Delivered January 31st, 2018. Contributors: Annette R., Ian M., Paulina P. and

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Negative News: Sage Road Energy

The researching of Sage Road Energy II LP did not offer up any negative information. This is a private equity fund that is managed by a company called Sage Road Capital. It appears to have a clean record and no legal issues. This may be because they have only been around for the past 5 years, are still relatively small, and have experienced personnel managing the fund. 
FINDINGSWhat we have found is that Sage Road Energy I LP and Sage Road Energy II LP are private equity funds operated by Sage Road Capital. Sage Road Energy II, LP was started in January 2017 as a limited partnership. The company is registered out of Delaware and has 18 beneficial owners with 11% management ownership and offices in Houston, Texas. Sage Road Capital just has the two investments and have about $150 million in assets. All details regarding ownership, executives and contact information is publicly available. 

The Sage Road Capital website does not have a news section, but we thoroughly researched the site to see if any complaints, lawsuits, or negative press was affiliated with it and were unable to locate any. The PrivateFundData report indicates the company has no legal issues with them. 

In researching the Sage company overview, we were able to locate detailed information that indicates they manage about $100 million in capital and have offices in both Texas and Oklahoma. The company likes to partner with owner-operators that have impeccable records in the U.S. market with conventional assets. Sage choose to participate in $10-$30 million dollar equity investments. The alignment structure is usually a management incentive and it has a preference for control but is very patient with regard to long-term capital and structure flexibility. Sage Road Capital does keep a social presence on LinkedIn explaining who it likes to partner with and how much the investments are. 

Additionally, we searched Sage Road Management Company on the Bloomberg website and identified a link to SRC Management Co LP that indicates the Sage Road Capital website and contact information. Additional searches on any of the names listed above show no negative news or litigation since Sage Road Capital opened in 2012. 

The only article with any news on Sage Road Capital or SRC or Sage Road Energy II LP is one by The Alternative Assets Network.  The article indicates the number of funds that have been raised under Sage Road Energy II LP that were filed with the SEC. It indicated $74.5 million was raised towards Sage Road Capital's Energy II LP fund. The article goes on to talk about the founders, who are the firm's managing partners and that the company typically likes to invest amounts between $20 and $50 million. 
REASONING FOR NO NEGATIVE PRESSAfter thorough researching, we have identified no negative information on Sage.  We believe this is because of several reasons:

1) Sage Road Capital is a pretty small firm with very little investment to date.

2) The company has only been in business since 2012.

3) The firm has experienced managers in charge. Management's expertise could be the reason for no claims. 

4) As Sage is a private firm they may not be open to public scrutiny and therefore not as much information exists publicly. 
CONCLUSIONIn summary, we have researched news articles, the names Sage Road Capital, SRC Company LP, and Sage Road Energy II LP and have been unable to locate any negative press or litigation pending for the company.  It appears to be a clean company that is relatively new and has about $150 million in assets. 

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Negative News: Hanover Investors

Negative news coverage of Hanover Investors is scarce and mostly relates to a few messy takeovers they've performed of certain companies around the UK -- I wasn't able to find any evidence of litigation against the company. Read on for the rundown of what negative news I was able to find!

OVERVIEW

I started with a general search for negative news involving Hanover Investors. That didn't turn up any results, as most of what came up involved a series of lawsuits involving fraudulent investments in New Zealand and not involving the actual company. To get some information, I searched UK media outlets including the Guardian, Financial Times, and the Sunday Times; these sources gave me some information, which often overlapped. I've outlined the only individual stories I was able to find below, ordered from most to least recent. These seem to be the only negative news involving Hanover Investors. Ultimately, they don't tend to be too negative, but do detail some messy corporate takeovers.

NEGATIVE NEWS: HANOVER INVESTORS

 October 2010 -- Matthew Peacock, the founder of Hanover Investments, ran into trouble in an Italian real estate development deal and faced red tape and disapproval from Italian banks. This article requires a digital subscription to the Sunday Times to read in full, however.

 February 2007 -- Hanover Investments led an investor coup against the current management team at SMG, a Scottish TV and media company. Matthew Peacock joined the SMG board as part of the coup, and Hanover installed its own preferred management team.

 August 2005 -- Hanover's takeover of chemical firm Elementis "took a bloody turn" with the sudden ouster of the sitting Elementis chief executive. That followed three other key executive departures during the takeover as Hanover installed its own management team. This article also requires digital access to the Sunday Times to get the full story.

 September 2003 -- The earliest negative story I could find, coming from early in Hanover Investments' operations. Hanover was in the process of acquiring a stake in 4imprint when talks broke down, prompting 4imprint shareholders to call for the removal of all non-executive members of 4imprint's board of directors.

CONCLUSION

After a general search and a search of popular UK media outlets, I was only able to find four negative news stories about Hanover Investors. Three are related to messy corporate takeovers they've been involved in and one follows Hanover founder Matthew Peacock's trouble with the Italian government in renovating an old villa. I wasn't able to find any evidence of pending or concluded legislation against the company.

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Negative News: Douglas Bay

We researched potential litigation and the corporate history of DouglasBay Capital, now known as DBAY Advisors, Ltd., an offshore investment firm headquartered in the Isle of Man. After extensive searching, litigation pertaining to DBAY Advisors or its CEO, Alexander Paiusco, was not found. However, research identifies British activist investor Colin Kingsnorth, well-known for his involvement in numerous controversial business transactions, as a principal figure and possible control person closely related to DBAY Advisors. In 2008, Kingsnorth's primary business entity, Laxey partners, faced criminal prosecution in Switzerland.

DBAY ADVISORS DBAY Advisors Ltd. was incorporated as DouglasBay Capital in the Isle of Man as an investment firm in 2011. The current CEO of DBAY Advisors is Alexander Paiusco, an individual reportedly of German heritage, age 45. Two of DBAY's best known investment transactions include: 1) the acquisition of British trucking company Eddie Stobart by DBAY investors for £280 million in March 2014, and 2) the acquisition of Creston Unlimited in November 2016 by DBay for £76m.

ACTIVIST INVESTOR Alexander Paiusco, CEO of DBAY, has publicly stated that DBAY Advisors is an activist investor entity, a controversial type of investment firm that typically buys positions in publicly-traded companies and then exerts various forms of pressure against management, with hopes to either be bought out at a profit or that the pressure will otherwise cause an increase in share price.

EDDIE STOBART ACQUISITION AND SALEIn March 2014, DBAY led a group of investors in a £280 million acquisition of British trucking company Eddie Stobart. It was a going-private transaction that left the DBAY investors with 51% control of the company. We located a shareholder dissenter letter, apparently written in opposition to the Eddie Stobart going-private transaction at the time it was proposed. In the letter, an anonymous author using the name "STOBART WHISTLEBLOWER" accused DBAY of participating in a "serious fraud," writing that "A highly material and misleading False Statement has been made attempting to cover up massive ongoing litigation and liabilities." It further states, among other things: "As we have stated before we believe that the Fraud is taking place to take the good assets offshore and leave the Public Company with all the toxic liabilities."

In March 2017, three years after taking the company private, DBAY Advisors participated in a new public offering as shares of Eddie Stobart were listed on the AIM stock market in London. Although we are unable to determine the exact amount of shareholdings involved, DBAY Advisors was listed in the offering circular as a selling shareholder. It should suffice in this context to estimate that DBAY investors realized a significant profit as a result of the three year going-private to going-public transactions of the Eddie Stobart trucking company, led by DBAY Advisors.

CRESTON UNLIMITEDIn November 2016, DBAY Advisors acquired Creston Unlimited for £76m. DBAY created a company called RedWhiteBlue Digital Marketing Services Holdings to complete the acquisition. Creston owned several well-known direct marketing agencies, including The Real Adventure and EMO, among other businesses. In October 2016, the Creston agency network rebranded itself to a new corporate name, Unlimited Group, while retaining the name Creston Ltd. for its holding company. In August 2017, the Creston Ltd. holding company also rebranded as "The Unlimited Group".

An interesting note is that DBAY now appears positioned to exert influence on ICM, the largest pubilc polling company in the U.K., which is owned by The Unlimited Group. ICM has conducted polls on everything from the public opinion about Brexit, to public opinions about immigration. DBAY recently increased its ownership stake in Creston. An article was recently published that hinted at possible trouble that could be brewing due to this arrangement.

Colin Kingsnorth AND Laxey partners Laxey partners is the primary business entity of well-known British activist investor Colin Kingsnorth. An activist investor known for taking aggressive positions against the companies he invests in, Kingsnorth is an experienced hedge fund professional who reportedly manages as much as $2 billion in assets. He does not openly disclose the total amount under management, nor the identities of Laxey's investors. Claiming to be "disinterested in money," Kingsnorth has publicly stated that he named Laxey in memory of the Isle of Man village where "used to live as a tax exile." In a public interview, Kingsnorth stated he has set up as many as 100 subsidiary companies when necessary to navigate certain regulatory requirements. In 2008, Kingsnorth's primary business entity, Laxey partners, faced criminal prosecution in Switzerland.

LAXEY PARTNERS / DBAY ADVISORS CONNECTIONSLaxey partners is the initial investor and majority owner of DBAY Advisors. Alexander Paiusco, the current CEO of DBAY Advisors, was previously employed by Laxey as a portfolio manager from Jan. 2006 to Oct. 2008. Saki Riffner, Chief Investment Officer of DBAY, is closely connected to Colin Kingsnorth, the principal of Laxey Partners. Riffner is listed in U.K. company records as a Director of Laxey Investment Trust Limited, together with Kingsnorth who also is listed as a director of the same entity. Colin Kingsnorth himself may now be serving as Chairman of DBAY while Alexander Paiusco remains CEO.

LAW FIRMSLegal and law firms connected to DBAY or Colin Kingsnorth identified by our research include Mayer Brown, offshore specialists Appleby, multinational advisors Shearman & Sterling, American lawyers King & Spalding LLP, and shareholder rights litigation firm Lowey Dannenberg. These firms have represented DBAY or Kingsnorth at some point, usually in corporate takeovers or activist shareholder transactions. The Appleby law firm which has apparently represented DBAY, was made famous for the "Paradise Papers" leak.

CONCLUSIONExtensive searching did not identify past or current litigation pertaining to DBAY Advisors ltd., DouglasBay Capital, or its CEO, Alexander Paiusco. DBAY is closely related to British activist investor Colin Kingsnorth, well-known for his involvement in offshore business entities and numerous controversial business transactions. Research indicates that DBAY was represented by the Appleby law firm, known for the "Paradise Papers" leak of 2017, exposing offshore entities and investors. Although DBAY Advisors does not appear to have much of a litigation history, Kingsnorth's primary business entity, Laxey partners, has historically been involved in many volatile business situations and transactions. While CEO Alexander Paiusco serves as the de-facto public face of DBAY, Kingsnorth appears to be serving in the background as the current DBAY Chairman, positioning him as a potential control person of DBAY Advisors.