Josh Harris, the billionaire co-founder of Apollo Global Management Inc., is quickly shrinking his ties with the company after losing a power struggle to run it.
Harris, a graduate in economics from the Wharton School at the University of Pennsylvania and managing partner of the Philadelphia 76ers, has offloaded nearly 6.6 million shares of the New York-based private equity giant since he announced in May that he was relinquishing the day-to-day responsibilities. This year, he liquidated around 18% of his holdings for at least $ 490 million, according to data compiled by Bloomberg, far more than in previous years and far beyond the sales of co-founders Marc Rowan and Leon Black.
Sales continue to hit the strip as Apollo’s stock nears record highs.
Harris, 56, reported last year that he intended to sell part of his stake for estate planning. But that was before an external review found that Black paid sex offender Jeffrey Epstein $ 158 million from 2012 to 2017 for tax and estate services. Harris then privately urged Black to relinquish control of the company to avoid damaging his reputation, which alienated Harris from the upper ranks of Apollo.
Black stepped down for Rowan to become general manager and Harris was sidelined.
Harris remains Apollo’s second largest shareholder and continues to be a “strong and supportive long-term shareholder of the company,” according to a statement from his spokesperson.
The sales drip – Harris executed 86 trades this year – is a distraction for investors, according to Jefferies Financial Group Inc. analyst Jerry O’Hara.
“The Harris sale was a surplus on the stock and continues to be a surplus,” he said. “If he did it in a bulk transaction, it would just be done instead of this slow bleeding.”
Apollo shares rose $ 1.06 (1.7%) on Wednesday, closing at $ 62.61. It has gained 34% this year, but that’s lower than Blackstone Inc.’s 77% gain and the BI Global Private Equity Managers Competitive Peers Index, which is up 51%.
Harris spokesman said sales are a de minimis portion of Apollo stock’s daily trading volume and most sales are made through a pre-set trading plan. He initially filed the plan last year to sell five million shares, but has since increased that level.
Apollo is set to merge with its permanent capital vehicle, Athene Holding Ltd., early next year, a change that will make sales of shares by the company’s co-founders more tax efficient. Harris’s departure is expected to coincide with the acquisition of the annuity provider.
Almost all of Harris’ 38.6 million Apollo shares are in units of the Apollo operating group – partnership units that must be converted into common stock before they are sold.
This process gives rise to a taxable capital gain, which is levied partly as capital gains and partly as ordinary income.
Upon completion of the merger, Apollo will be reorganized into a C corporation with a single class of common stock. Harris units will be exchanged for cash and Class A shares. Gains from the sale of such shares would be taxed at the capital gains rate.
The federal capital gains rate is 23.8%, including the 3.8% surtax on net investment income. The top federal marginal ordinary income tax rate is 37%, which means that, other things being equal, Harris would be better off selling once the merger is complete.
Harris, however, has already started to lay the groundwork for raising his own funds. He has met with recruiting firms to help him start building a team and plans to invest in mid-market private equity deals, Bloomberg reported in July.
It already has significant external business interests. His family office manages his personal fortune of $ 7.4 billion, including as the primary owner of the NHL New Jersey Devils and as a member of the group that owns the English Premier League football team Crystal Palace. .
Black has a net worth of $ 11.6 billion, according to the Bloomberg Billionaires Index, about half of which is in Apollo shares. He never sold part of the business.