After 27 years, the Calamos family decided to share the fruits of their labor by taking the firm public. Money manager Calamos Asset Management has set the terms of its initial public offering at 18 million Class A shares with an estimated price range of $15.50 to $17.50 a share.

"The question that a lot of people have had with any deal like this is who is getting the benefit of the money?" said David Menlow, president and founder of a research firm headquartered in Milburn, N.J. "This is a very closely controlled partnership. They're just allowing new investors to come into the fold through the subsidiary."

Calamos, best known for its closed-end funds, will use the cash from the IPO to purchase newly issued units directly from its subsidiary Calamos Holding, with the remaining proceeds being used to buy membership units in Calamos Holding from Calamos Family Partners. Ultimately, Calamos Holding will put the proceeds from the sale toward working capital and general corporate purposes, including an expansion of its alternative investments business.

After the IPO takes place, common stockholders will then own over 99.9% of its outstanding capital stock, according to the filing. Each share of Class A common stock will entitle its owner to one vote, while Class B common stock owners will receive a greater number of votes for each share, the filing said.

Wall Street heavyweights Citigroup, Merrill Lynch, Goldman Sachs and UBS Investment Bank were listed as the underwriters for the offering. As underwriters, the firms are allowed to purchase up to an additional 2.7 million shares of Class A common stock to cover over-allotments, the company said.

Shares of Calamos will trade on Nasdaq under the symbol CLMS.

Ahead of the IPO, a debate has emerged over whether the offering will have an adverse effect on fund shareholders. Investor advocates have said taking a fund company public divides the interests of the company shareholders and that of the fund shareholders.

Those invested in the company want to see strong earnings and revenue, part of which is derived from fees charged to fund shareholders. The fund shareholders, on the other hand, demand strong performance, which means keeping fees low and closing funds when they grow too large. Calamos could not be reached for comment.

T. Rowe Price and Eaton Vance have been publicly traded companies for years and argue that it does not affect the way they manage money. The firms pride themselves on doing right by long-term investors and assert that satisfied customers help get more assets in the door and boosts profits, thereby benefiting the company's stockholders.

But the problem with pricing is a real one, and it presents a significant conflict of interest for fund management, who now must deal with a whole new constiuency. "That seems to be the recurring theme for all of these IPO deals and the reason that many of them have withdrawn," Menlow said.

New regulatory reforms being considered also present a problem for Calamos, including an SEC proposal to register hedge funds, a rule that could have a prohibitive effect on future revenue. Another potential hurdle is a proposal to ban all soft-dollar arrangements, one that would have cost Calamos $900,000 for broker research in 2003, its filing outlined.

Calamos manages a number of closed-end funds, which some industry observers believe could help insulate the firm from risk because once the initial cash is raised there are no daily redemptions but rather a steady flow of management fees.

Making a Statement

"This appears like it has all the trimmings of a successful offering," Menlow said. "It's an issue of fees." He went on to say that while there is definitely going to be a "detrimental overtone" of investing in this market due to the trading scandal, it does not poison the well for new offerings. Menlow views the Calamos IPO as "a statement of confidence" that these types of deals can be done.

"The value equation rests a little more heavily in the lap of the investors," he said. He added that in a year's time, a deal like this could be priced much differently depending upon investors' appetite for new offerings.

The number of companies that have gone public so far this year has reached 148, according to Thomson Financial, parent company of the publisher of this newsletter, compared with 85 for all of 2003. However, one-third of the new issues this year have been priced below their predicted offering range, compared with 20% in a typical year. And the average IPO stock is down 3% this year since its offering.

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