Dan Loeb exposes risks in UK listing reforms

Malibu Life Holdings

01/08/2025 12:32

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Neil Unmack

LONDON, Aug 1 (Reuters Breakingviews) - The United Kingdom’s major recent listing reforms, finalised in 2024, were a bold bet that weaker investor protections would kickstart London’s moribund initial public offering market. So far, that hasn’t happened. One test of the rules may be on the horizon, however, involving a vehicle managed by U.S. hedge-fund impresario Dan Loeb. The problem is that it mostly illustrates the downsides of the new approach.

Third Point Investors (TPIL) TPOGu.L is undertaking a bold reinvention. The London-listed investment company, run by Loeb’s New York-based Third Point Management, has traded at a big discount to its $509 million net asset value and struggled to grow. Now, it wants to merge with a Cayman-based reinsurer set up by Third Point, called Malibu Life Reinsurance, effectively changing the London vehicle from a listed equity fund into a specialist in writing annuities and buying asset-backed credit and corporate debt. Loeb will manage the reborn company too.

Investors who get with the programme could benefit. The transaction would swap their shares for Malibu equity at net asset value (NAV), whereas U.S.-listed annuity providers often trade at a premium, implying possible future upside.

Yet it’s also a risky move: Malibu is a startup, will have to compete with big players like Apollo Global Management, and probably won’t make its targeted return on equity of 17% at least until 2027. It may even trade below book value, especially given the lack of London-based peers. Rebellious shareholders have criticised the deal. One of them, Asset Value Investors, called it “odious”, and accused the TPIL board of lacking independence. A key bone of contention is that shareholders who choose to opt out ahead of the merger may not be able to cash out fully, and face at least a 4.8% NAV discount on redemption.

Beating Loeb in a vote looks tough. UK listing rules previously required related-party transactions, like merging with a company that a manager or CEO also runs, to secure majority support among independent shareholders. That would have excluded Loeb’s 25% stake in TPIL from any vote, giving minorities an amplified voice. The Financial Conduct Authority’s new approach has no such general requirement, meaning Loeb’s 25% ownership may help him carry the day. Were that stake to be excluded, the battle may be less clear cut. Investors opposing the deal claim to speak for 24% of shares, versus 21% backing it, according to a statement on Friday.

Granted, creating vibrant new companies in London, which is what Loeb presumably thinks he is doing, is exactly what the FCA’s listing reforms are all about. The alternative, winding down TPIL, would only shrivel the market, and Loeb could probably block it anyway. Yet arguably independent investors facing such a radical change of strategy should have the right to fully redeem without facing a discount.

If Malibu thrives, TPIL’s move will prove to be a worthy gamble. Yet the fight also shows that UK listing reforms have a cost. And, with London IPOs at a 30-year low, the stated benefits of the changes are still hard to discern.

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CONTEXT NEWS

Shareholders in London-listed fund Third Point Investors, which Dan Loeb’s Third Point Management runs, will on August 14 vote on proposals to acquire Malibu Life Reinsurance. That business was set up by Third Point Management vehicles and is also overseen by the hedge fund.

Under the proposed deal, TPIL would swap its shares for those of Malibu, a Cayman Islands-based reinsurer, with the financial terms set based on the companies’ stated net asset values. After the merger, TPIL’s $509 million of assets will be sold down over time to fund the development of Malibu’s business, which involves selling annuities and investing in asset-backed credit and other corporate debt. Third Point is targeting a 17% return on equity for Malibu from 2027.

TPIL’s shareholders also have the option of redeeming a portion of their funds, up to a cap of $136 million in total, and at a 4.8% discount to net asset value.

TPIL said on July 23 that it had received irrevocable undertakings from shareholders holding 45% of the company’s voting rights to back the deal. That includes Third Point Management, with 25%.

A group of investors holding 14% of votes has criticised the deal, and said that it has spoken to investors holding a further 10% that will vote against the deal.

Shares in Loeb’s London fund consistently lag stated net asset value https://www.reuters.com/graphics/BRV-BRV/mopadwnzava/chart.png

(Editing by Liam Proud; Production by Oliver Taslic)

((For previous columns by the author, Reuters customers can click on UNMACK/neil.unmack@thomsonreuters.com))