Jeffrey Gendell's Tontine Associates Sells Broadwind Energy Shares (BWEN) ~ market folly

Wednesday, July 1, 2009

Jeffrey Gendell's Tontine Associates Sells Broadwind Energy Shares (BWEN)

Jeffrey Gendell's hedge fund firm Tontine Associates has just filed a Form 144 with the SEC disclosing that they will be selling 378,256 shares of Broadwind Energy (BWEN) with an aggregate market value of just over $4 million with 96,546,782 shares outstanding. Additionally, the filing shows us that on 6/28/09, Tontine sold 915,000 shares for over $9.7 milion. For those of you unfamiliar with a Form 144, it is basically a notice of proposed sale of securities. In this case, Tontine is trying to wind down some of their illiquid and hard to sell positions where they are the majority owners. This is not a new development, as Tontine has been trying to wind down these positions for some time now. Goldman Sachs is the broker who will offer/acquire the securities in this transaction. Tontine had originally acquired shares back on March 1st, 2007. This all comes interestingly enough after shares of BWEN have jumped over 51% over the past week on news of the realignment of its management team and technology efforts.

This is yet another development in the wake of Tontine's blowup. They closed down 2 of their funds after horrid performance in 2008 and have been recuperating ever since. One would think that such a recovery would be a long, hard road. Tontine would argue the contrary. Their performance numbers this year have been ridiculously good. But, keep in mind that they are still within the context of a horrid prior year. As we noted in our May 2009 hedge fund performance numbers post, Tontine's 25 fund was up 17.5% for May and was up 72.3% for the year at that time. Their Partners fund was up 15.2% for May and was up 49.8% for the year at that time. So, outstanding performance and quite the rebound. And, while 2 of their funds may have closed down, Tontine has a new Total Return fund that launched back in February.

Founded 11 years ago, Tontine is a $6 billion firm ran by Jeffrey Gendell. Gendell graduated from Duke and worked in Corporate Finance for Smith Barney. He specializes in macro investing and takes very large, concentrated positions in companies he feels will benefit from those macro themes. Additionally, he will take on an activist role when necessary, to ensure shareholder returns. The fund has posted returns in excess of 100% in both 2003 and 2005, but posted massive losses in 2008. Gendell's Tontine firm is named after an annuity invented by Lorenzo de Tonti. In such an annuity, investors contribute and collect dividends. As investors each die off, their share is left to the remaining partners. Therefore, the last man alive receives all the money. Gendell's desire is clearly to be that 'last investor' remaining. Such a goal becomes slightly ironic when you consider his firm suffered monumental losses and almost 'died' last year. Gendell explains the turmoil they faced in his October letter to investors (.pdf format).

Taken from Google Finance, Broadwind Energy is "a supplier of value-added products and services to the North American wind energy sector, as well as other energy-related industries. The Company provides range of component and service offerings to wind turbine manufacturers and developers, wind farm operators and service companies. It has developed a range of United States-based supply chain for wind development in North America."

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