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Fortress Investment Group Case Solution

Solution Id Length Case Author Case Publisher
1306 846 Words (4 Pages) Malcolm P. Baker, Carlos Galvez, James Quinn Harvard Business School : 208080
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Offering shares on the stock exchange for the first time is nothing less than a milestone for privately-owned companies like Fortress Investment Group. There are various reasons that can justify the step of going public. Foremost of all, is that most of the companies go public to raise finance and to reduce debt. This reduction of debt would help the companies to improve their leverage ratios and hence the risk attached to it. Moreover, going public would put the company in a better position to negotiate the interest rates with the banks on existing debts. Consequently, the overall cost of capital will be minimized, and the profitability will be improved. In the case of the Fortress Investment Group, there are four advantages of which, the initial public offering was justified.

Following questions are answered in this case study solution

  1. What are the advantages of public listing for Fortress, including its principals and current investors in its funds? Are there disadvantages?

  2. From the perspective of an outside investor in public equity markets, would Fortress stock be an attractive investment?

Case Analysis for Fortress Investment Group

By getting listed on the stock market, the company is also able to provide remuneration to its employees in the form of stocks of the company. By linking the compensation of the employees with the publicly traded securities that show the performance of the company, employees are motivated to derive results. Because when the employee performs, the company will be profitable and ultimately the share price would go up.

The companies have a reasonably decent reputation among potential investor groups if the company is listed on the stock exchange. Thus, Fortress expected that going public will allow it to access to more share capital. And if the alternative investment group followed this activity, this would prove to be icing on the cake.

By issuing stock of its company, Fortress could reach to the level where it has its currency which can be used to attract the money managers. At the same time, Fortress will be able to finance other investment or acquisitions. The managers at Fortress were more oriented towards the view that asset managers who have limited funds to supervise would be more attractive towards the groundwork, resources, and the positive investor dealings that Fortress will be able to provide after the initial public offering. In today’s growing economy, merger and acquisitions are of much importance which is because of the institutionalization of the alternative asset manager. Therefore, having access to one owns currency by being publicly listed company would help to keep up with the pace competitive landscape.

Lastly, as mentioned above Fortress would have more access to capital. This new capital can be used to expand and offer new products to diversify the current portfolio. The capital can be invested in human development and attracting managers who will supervise the new product lines.


Some analyst viewed going public as a risky step and argued that if this move is imitated by other players and became widespread, it could bring harm to the industry, and the performance will be undermined.

Another disadvantage that most critics view was to comply with the regulations. A publicly listed company has to comply with several regulatory frameworks including Sarbanes-Oxley. Moreover, the company has to obey the guidelines issued by security exchange commission. This could require an enormous effort on the part of the company.

Moreover, the company has to disclose their strategy of trading and their methods of investment. This goes against the company’s privacy policy and hence going public is unwelcomed by most asset managers.

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