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Editor: Brian JM Quinn
Boston College Law School

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Wednesday, June 13, 2007

Another Day, Another Asset Manager Files to Go Public

Pzena Investment Management, Inc. today filed an S-1 registration statement to go public.  Founded in late 1995, Pzena is, according to its S-1, a value-oriented investment management firm with approximately $28.5 billion in assets under management.  Pzena is selling Class A shares with one vote apiece; the current owners and employees of Pzena will convert their holdings in the initial public offering into Class B shares with five votes apiece.  In addition and similar to Blackstone, the purchasers of Class A stock in the offering will buy shares in a holding company -- the holding company's sole interest will be shared economic ownership of the main operating company with the Class B shareholders. 

The S-1 does not yet disclose the exact offering amount and percentage share of votes the Class A shareholders will acquire post-ipo.  But even at this point the offering does not go as far as Blackstone's -- unlike Blackstone, the shareholders here will at least have voting rights and the 23 current Pzena owners/shareholders are not selling in the initial public offering -- the proceeds here are being used to buy-out three former employee shareholders.  Since the Pzena offering is not as hot, or maybe public, as the Blackstone or Fortress ipos the Pzena owners maybe felt compelled to at least offer some enfranchisement to purchasing shareholders and maintain standard no-sale ipo practices.  Still, the trend among investment management firms to offer dual class stock with low or no votes is troubling, and likely to have ramifications down the line.  Given its increasing use, it may be time for the SEC to once again look at the appropriateness of this type of stock as they last did in the 1980s when they promulgated rule 19c-4 (for more on that attempt and its subsequent failure in the D.C. Court of Appeals see Bainbridge's article here).  But until then, investors in these initial public offerings have been warned.

And for those who don't care Blackstone announced its ipo date today:  June 25.  The units will trade on the New York Stock Exchange under the symbol BX.   

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