IPO set to net a billion for Sprott

Sprott Asset Management Inc's initial public offering this week will make a billionaire of the hedge fund company's founder, spurring speculation Canada's decade-old commodities boom is ending, investors say.

Eric Sprott's bets on gold and oil pushed his Toronto-based flagship fund to an average return of 27 percent a year since 1998, more than three times the gain of Canada's Standard & Poor's/TSX Composite Index. The fund bought mining stock Thompson Creek Metals Co in 2006 prior to a rally that lifted it tenfold.

Sprott is cashing out eight years after forming the company that made him one of Canada's best-known speculators. The C$230 million ($226 million) IPO is reminiscent of last June's share sale of US private-equity firm Blackstone Group LP, said Stephen Jarislowsky, chief executive officer of Jarislowsky Fraser Ltd in Montreal. That IPO preceded a 56 percent decline in monthly takeover volume in the United States.

"When the LBO firms went public, the next day, the game was up," said Jarislowsky, whose firm manages about $56 billion. "Why is he going public? If it's going that well, why would you let anybody in on it?"

Insiders led by Sprott filed last month to sell as much as 15 percent of the company, which manages C$6.9 billion in mutual funds and hedge funds. Sprott Asset plans to sell as many as 23 million shares, according to the sale documents. The founder's 78 percent stake would be worth about C$1.17 billion at C$10 a share, the mid-range of the estimated offering price. The shares are expected to be sold on May 7.

Agencies

(China Daily 05/06/2008 page16)