ELYRIA, Ohio — Whitebox Advisors LLC, the Minneapolis hedge fund family headed by Andrew Redleaf, has acquired 1.8 million shares, or 5.4 percent, of Invacare Corp., the maker of home health care equipment and products, according to a regulatory filing.
The Securities and Exchange Commission requires such filings when an investor owns more than 5 percent of a company’s stock. Whitebox included the usual disclaimer on its filing, saying its Invacare shares are “held in the ordinary course of business” as an investment adviser and were not acquired to change or influence control of the Elyria manufacturer.
The shares underlie Invacare debt that can be converted to common shares. Hedge funds are lightly regulated pools of money that are privately managed for wealthy individuals and institutions.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Invacare might want to take as a compliment the Whitebox purchase for five of its funds and one master trust, including Whitebox Multi-Strategy Fund L.P. and Whitebox Concentrated Convertible Arbitrage Fund. It probably means Invacare is worth more than its convertible bond or stock prices would lead investors to believe.
The practice of convertible arbitrage — taking advantage of these pricing inefficiencies — usually involves buying a “long” position in a company’s bonds and balancing the associated risk by short-selling its stock.
Redleaf, a former commodities trader, is considered a contrarian hedge fund manager, according to the New York Times. He predicted the structured finance meltdown in August 2007. At the time, Whitebox Advisors was not the only firm to bet against sub-prime mortgages, which were at the root of the meltdown, “but it did so with searing and amusing insight, a trademark of the founder and the firm,” the Times said.
Unlike hedge fund managers who do their work through the investor’s version of sleight of hand, Redleaf seems to want to do his work above the board.
“Whitebox is an intellectually honest, collegial enterprise,” according to the “About Us” section of his firm’s Web site. “Our name derives from our deep commitment to transparency, trustworthiness, open communication with our investors and our firm belief that the best and most enduring investment strategies are comprehensible by the typical hedge fund investor.”
Whitebox is not immune from trouble. In October 2008, when equity markets hit the skids, Whitebox — like many hedge fund managers — wouldn’t let customers cash out for a time as it navigated investment losses, according to the Minneapolis Star Tribune.
In December, nearly two dozen investment funds, including a handful managed by Whitebox Advisors, filed a federal lawsuit accusing a Georgia sub-prime lender of fraudulently transferring millions of dollars in assets to company insiders and shareholders at the expense of debt holders, the Star Tribune reported.
The firm manages about $3 billion in assets and employs more than 65 professionals, according to its Web site.
Health care was the largest sector among Whitebox holdings — 26 percent — in the fourth quarter, according to Tracked.com. The adviser’s top holding was Omnicare, the drug distributor to nursing homes and assisted living centers in Covington, Ky., at a market value of $37.6 million.
At $26.38, Wednesday’s closing price for Invacare shares, Whitebox’s investment in the Elyria manufacturer would be worth $47.5 million.
