Did Phil Falcone Just Lose $68 Million On Palm?

philip falcone harbinger

Billionaire hedge fund manager Phil Falcone either made a killing or got crushed yesterday when HP announced that they bought Palm for $1.2 billion or $5.70 per share.

The difference depends on when Falcone bought into Palm and it’s huge. The performance of his 16 million shares fluctuates nearly $100 million between how much he could have made and how much he could have lost, which shows how little we actually know about hedge funds’ returns.

Falcone, the hedge fund manager of Harbinger reported a 9.48% stake in Palm on April 12th. (It was a new position that he hadn’t reported before in his 2009 Q4 13F.)

Funds have to file 13G and 13D reports within 10 days if they buy more than a 5% stake in a company. So Falcone bought at least 4.5% of Palm between April 2 and April 12. Now he owns 16 million shares, a 9.48% stake.

Let’s figure out how much Falcone made.

  • Best case scenario: +$27.2 million.

If he bought all 16 million Palm shares at their lowest price (sub $4 between March 25 and April 6) he made more than $27.2 million.

  • Worst case scenario: -$68 million.

Let’s say Falcone bought a 4.9% of Palm at its highest price ($13.5 in January). And then tipped the 5% ownership scale and had to a 13G on when he bought the remaining 4.5% of the company on April 12th, when Palm was selling at $6. Then he would have lost a whopping $65.7 million on the 4.9% (~8.42 million shares) he bought in January and $2.27 million on the 4.5% (~7.58 million shares) he bought on April 12. In total, he could be down almost $68 million.

That’s a big difference, and he very well could have been crushed. But we’re going to be optimistic and hope Falcone just made a killing.

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