Investors in a new bond fund have been set to have their money wiped out after it fell short of its target.
Fidelity said Thursday it has a fund in which it aims to make a return on its $30 billion bet that it will grow its dividend from 1 percent to 2 percent, according to a filing with the Securities and Exchange Commission.
Fidelity also said it plans to raise an additional $500 million through its dividend-paying securities, including the bonds it has offered.
Finance officials in New York have been scrutinizing the fund since the company announced its bid for the IPO, with some critics questioning whether it would be a good investment.
They said the fund is risky because it trades in bonds with higher costs than its peers.
Fulbright and its investors had been expecting to receive more than $500 per share for the fund when it was announced, and analysts said Thursday that is no longer the case.
FULBERSEX: Fidelity’s $30B IPO bid will be a huge hit, says fund managerRobert Siegel, a fund manager at Fidelity Asset Management in New Jersey.
Fulfillment fees will likely be higher than the $1.3 billion price Fidelity paid to buy the firm, and the fund will likely end up being worth more than the initial $30bn, he said.
Siegel added that Fidelity is going to need to raise more money to take the risk.
The fund will be in bad shape once the IPO closes, he added.
Fulfillments companies have said the money raised from the fund would be used to make up for lost profits the fund made in selling its bond securities.
FUMBLE FALLS: Fulfilment executives said the investment in Fidelity will boost their bottom line, and they expect it will be profitable.
FSUED WITH $30 BILLION DEBT: FSU said it has reached an agreement with Fidelity to buy it for $30 in a deal that will keep it in business for years to come.
The firm is trying to grow its market value and make up a large chunk of its business.
FSTATS: FSTATES shares fell 2.8 percent to $29.40, as investors took a chance on the bond fund and the stock itself.
FUCHS: Fuchs stock fell 8.4 percent to close at $26.87.