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Paulson May Have Gained $439 Million on Delphi Automotive’s IPO

Paulson And Co. President John Paulson
John A. Paulson, president of Paulson & Co. Photographer: Rick Maiman/Bloomberg

Nov. 17 (Bloomberg) -- John Paulson, the billionaire hedge-fund manager having the worst year of his career, may have made a $439 million profit from the sale of his Delphi Automotive Plc shares in yesterday’s initial public offering.

The average purchase price paid by investors such as Paulson, who converted debt to equity during Delphi’s bankruptcy, was 67 cents a share, according to a filing with the U.S. Securities and Exchange Commission. If Paulson paid the average cost and sold 20.6 million of his shares as intended at the $22 IPO price, he would have received $453 million on a $14 million investment.

The return would almost erase the $468 million June loss that New York-based Paulson & Co. posted on Sino-Forest Corp., the Chinese forestry company accused by short-seller Carson Block of overstating timberland holdings. The hedge fund, previously the largest investor in the stock, sold its entire stake in June after Sino-Forest shares plunged 71 percent in two days.

Paulson said this week he cut risk in all of his hedge funds after a year of losses in most of them and as the European sovereign-debt crisis roiled markets. He reduced the so-called net exposure in his biggest funds, Advantage Plus and Advantage, which have $11 billion in combined assets, to 30 percent from 60 percent about four months ago.

The Advantage funds, which aim to profit from corporate events such as takeovers and bankruptcies, have declined 44 percent and 29 percent this year through October, respectively. Year-end withdrawal orders total about 8 percent of the firm’s $28 billion in assets, or about $2 billion.

Discount to Peers

Paulson & Co., the auto-parts maker’s biggest investor, stood to retain 16 percent of the company after the IPO, according to the SEC filing.

Armel Leslie, a spokesman for Paulson, declined to comment on the firm’s sale of Delphi shares.

Delphi, the former parts unit of General Motors Co., sold shares at a discount to peers in last night’s IPO, giving the company an enterprise value of $8.5 billion, or 4.4 times earnings before interest, taxes, depreciation and amortization in the past 12 months. That compares with 5.4 for rival Visteon Corp. and an average of 5.8 times among North American auto-parts makers, based on data compiled by Bloomberg Industries. The shares begin trading today on the New York Stock Exchange under the symbol DLPH.

Delphi, which won’t get any proceeds from the sale, had originally sought to raise funds for paying down debt and capital spending, according to a May 25 regulatory filing.

Profitable Again

The Troy, Michigan-based company, which emerged from bankruptcy in 2009 and is run by Chief Executive Officer Rodney O’Neal, returned to profitability last year after cutting costs and focusing on selling fuel-injection systems and other car parts in faster-growing countries such as China.

Earnings in the three months ended Sept. 30 more than doubled to $266 million. Delphi has about 101,000 workers, mostly in lower-cost countries, compared with 184,000 in 2005 when it filed for protection from creditors.

To contact the reporters on this story: Kelly Bit in New York at; Katherine Burton in New York at; Mark Clothier in Southfield, Michigan at

To contact the editor responsible for this story: Christian Baumgaertel at

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