Apollo remains unconvinced on C-corp switch

Stock price performance will factor into the firm’s decision to remain as a partnership or convert to a C-corporation.

Apollo Global Management hasn’t discounted the idea of converting from a partnership to a C-corporation, but says it will not rush to make a switch.

“There’s no real milestone” for making that decision, Apollo co-founder Josh Harris said during a conference call about its third-quarter results on Wednesday. He added the conversion into C-corporation would halt cash going to the partners under the partnership structure.

He turned to KKR as an example of the effects of the C-corporation switch; that firm’s shares had a brief sharp advance in the weeks following its May 3 announcement. The stock has since then pared most of those gains.

“The stock price changes daily. We were all sitting around yesterday staring at KKR’s performance since they converted, and it’s not dissimilar to ours but it depends on which time period you pick,” Harris said. “If we think we can create value… for our shareholders, we’re going to do it. That’s really as much as I can say at this point.”

KKR made the move to C-corporation to broaden its stock ownership, which it said on Monday now includes about a dozen index funds at Vanguard and some passive funds that focus on the broad stock measure S&P Total Market Index.

“We do think there is some positive uplift in the stock,” Harris said, in reference to KKR. “Unfortunately that sort of uplift is going to have to stand the test of time because as we’ve said before, you’re destroying cashflow permanently.”

Ares Management was another firm that made the switch to C-corporation, taking advantage of the reduction in the corporate tax rate to 21 percent from 35 percent under the new tax law.