Latticework Investor

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Cowen Group

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Cowen Group is a mid market investment bank and alternative asset manager.

Hedge fund Ramius reverse merged into Cowen. The asset management side of business will not make any money from incentive fees until investors get back their losses from the fund. The value is in the company’s cash assets invested in their hedge fund and future earnings from incentive fees.

This idea came from an article on Seeking Alpha.  A few quotes are below:

Cowen Group is transforming itself from a small boutique investment bank into a complete financial services company with >$7 billion in assets under management. Ramius, a privately-held alternative investment manager, recently acquired Cowen Group in a reverse merger that closed at the end of 2009. The Company has more net cash and investments than market cap despite a) stabilized asset flows on the Ramius side of the business, and b) a dramatic increase in leads and wins and on the investment banking side.

Cowen trades at 0x EV/AUM, below book value and at about 5x normalized earnings. Peers trade at 7% EV/AUM, 1.3x-2.0x BV and anywhere from 6x-30x 2011 earnings. It is probably best to value this as a sum-of-the-parts as the business drivers are somewhat different and so are the peers. We think the shares are worth a minimum of $9 (shares were near $9 last summer and near $8 in November) valuing Ramius at 2.5% AUM and the investment bank at 1.0x book.


Written by latticework01

February 15, 2011 at 4:32 pm

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