New York hedge funds snap up excess Goodman Group stock

New York-based executives at the Wall Street bank Citi are said to have been in charge of selling excess Goodman Group stock at a discount. Picture: AFP

A group of hedge funds out of New York are believed to have been the buyers of shares in Goodman Group worth at least $813m that were sold by investment bank Citi late last week following a mispriced block trade by China Investment Corporation.

The understanding is that the stock was cleared out of New York by the Wall Street bank, with observers suggesting that the decision-making surrounding the trade would now be handled by the Wall Street bank’s global risk committee and taken out of the hands of the local equity capital markets team led by Rob Jahrling.

Shares were sold into the Australian market on Friday morning, with 23 million shares crossed at $35.35 each after the stock closed at $36.26 on Thursday.

Shares on Monday in Goodman Group closed up 3.4 per cent to $37.80.

Citi lost close to $75m on the mispriced block trade of China Investment Corporation shares out of Goodman Group last week, according to estimates.

It underwrote a deal to sell 50.4m shares at $37.55, which was a discount of about 1.5 per cent to its last traded price.

But after backing the sell down at $1.9bn by guaranteeing the price to CIC, it then had to reprice the deal lower when demand was lacking to $36.85 to get the stock away.

Even then it appeared it was then left with 23 million shares, which were understood to have been sold on Friday morning.

It comes ahead of the investment bank’s bonus payments, which are due shortly in Australia, and the mispriced deal is expected to have an impact on those local payments, particularly its equity capital markets unit.

In the past, the budget for Citi’s Australian banking unit was said to be about $US100m, so the expectation is that the latest situation would have a substantial impact on the local division’s earnings for Citi.

Sources say that while block trades can be repriced lower in the United States after being launched, the situation is rare in the Australia market.

Other market rivals had priced the discount at a range of about 3 to 5 per cent.

Goodman Group has been in hot demand due to its exposure to data centres, and some question whether Citi may have faced pressure to be aggressive in its pursuit to land the mandate.

Citi’s competitors are making lucrative fees from investment banking activity related to data centres, one of the most highly sought after asset classes in the current market due to their growing demand with the increased use of artificial intelligence.

Macquarie sold its data centre business AirTrunk for $24bn to Blackstone, (Citi was in fact among Blackstone’s advisers), but for David Di Pilla’s $2.7bn data centre vehicle that lists next Monday, a raft of banks were hired on that transaction, with Citi not among them.

Citi previously counted NextDC as one of its key clients, and the data centre operator’s activities have proved lucrative for the investment banking community over the years, with it frequently tapping the market.

Citi worked on raisings in the past, including its move in 2020 to secure $672m.

But on recent equity raisings, including a $1.3bn raise in April, Citi has not advised on deals for the $10.4bn Craig Scroggie-led company, but rather it has been its rivals, which in that case were Morgan Stanley and RBC.