Fortress shares soar in debut

Shares of Fortress Investment Group, the first U.S. hedge fund manager to go public, soared Friday in a trading debut sure to catch the attention of many players in the $1.4-trillion hedge fund industry.

The stock’s initial public offering was priced late Thursday at $18.50 a share and rocketed to $37 at the start of trading on the New York Stock Exchange. The shares, under the symbol FIG, then pulled back but still closed up $12.50, or 68%, at $31.

Although a number of hedge fund firms have gone public in Europe, Fortress is the first to hit the market in the U.S. Investors viewed the IPO as a crucial test to determine whether other hedge fund managers would follow Fortress onto the market.

“The best hedge funds are watching this stock trade, tick by tick,” said Scott Sweet, managing partner of Tampa Bay, Fla.-based advisory firm IPOBoutique.com.

“It’s a pioneer of what will likely be the beginning of several similar, high-quality hedge funds to come public in the U.S.,” he added. “Had this not done as well, it would have obviously put a crimp in future hedge funds coming public.”

Investors in Fortress own shares of the management company. They aren’t investing in its various funds.

Perrie M. Weiner, international co-chairman of securities litigation at law firm DLA Piper, estimated that 20 more hedge fund companies could go public in the next two years.

Goldman Sachs and Lehman Bros. underwrote the IPO, which raised about $630 million. Fortress said it planned to use the money to expand.

At the stock’s closing price Friday, the company had a market value of $12.4 billion.

“It was massively oversubscribed,” Sweet said. “The road show was wall-to-wall, standing-room-only at every site.”

Hedge funds are loosely regulated investment pools catering to rich people and institutional investors.