Private Equity News & Analysis

TA-backed GlobeOp forced to pull float(2)

GlobeOp Financial Services, a hedge fund administration business backed by US private equity group TA Associates, has been forced to cancel flotation plans after being hit by a $500 million lawsuit from a disaffected former hedge fund client.

-

A collapsed US hedge fund is bringing a $500 million lawsuit against GlobeOp Financial Services, a private equity-backed hedge fund administration business, forcing the company to cancel its plans to raise over £50 million by listing on the London Stock Exchange.

Archeus Capital Management is suing GlobeOp following its spectacular collapse, which saw the US hedge fund close down last October after seeing assets under management fall from $3 billion to $700 million in just 18 months. In its suit, Archeus said GlobeOp had acted “with reckless indifference” in running the fund, “in a manner that smacked of intentional wrongdoing.” It is seeking damages of at least $465 million.

GlobeOp was about to price its initial public offering in London, which was expected to raise £52 million, but said yesterday that it would put these plans on hold until the issue has been resolved.

However, the company fiercely denied the allegations, suggesting they were deliberately timed to disrupt the IPO. “GlobeOp believes that the nature and timing of Archeus’ complaint is calculated  to gain maximum leverage against GlobeOp during its IPO. GlobeOp rejects Archeus’ claims and intends to vigorously assert a strong defence as well as counterclaims,” the statement to the stock exchange said.

GlobeOp also looked to reassure the market by insisting that the legal case against it was completely unfounded. “The overwhelming portion of Archeus’ claim for $465 million is for consequential damages. GlobeOp’s contract with Archeus expressly excludes claims for consequential damages and, in particular, for damages relating to loss of business or lost profits,” the firm said.

GlobeOp is one of a number of companies that provides daily administration services to hedge funds, including the maintenance of daily trading records, ongoing calculation of net asset values and communication to investors. The firm’s shareholders include Boston-based private equity from TA Associates, which invested $82 million in 2003 for what is believed to be a 40 percent stake.