Billionaire Harris is unloading Apollo stock after ouster

Josh Harris, the billionaire co-founder of Apollo Global Management Inc., is rapidly shrinking ties to the company after losing a power struggle to run it.

Harris, who holds an economics degree from the Wharton School at the University of Pennsylvania and is the managing partner of the Philadelphia 76ers, has offloaded almost 6.6 million shares in the New York-based private equity behemoth since announcing in May that he was relinquishing day-to-day responsibilities. This year, he’s liquidated about 18% of his holdings for at least $490 million, according to data compiled by Bloomberg, far more than in prior years and well in excess of sales by co-founders Marc Rowan and Leon Black.

The sales keep hitting the tape as Apollo stock hovers near record highs.

Harris, 56, signaled last year that he intended to sell a chunk of his stake for estate planning. But that was before an outside review found that Black paid sex offender Jeffrey Epstein $158 million from 2012 to 2017 for tax and estate services. Harris then privately urged Black to give up control of the firm to avoid damaging its reputation, which further alienated Harris from Apollo's upper ranks.

Black stepped aside for Rowan to become chief executive officer and Harris was sidelined.

Harris remains Apollo's second-largest shareholder and continues to be a "strong and supportive long-term shareholder of the company," according to a statement from his spokesman.

The drip-drip-drip of sales — Harris has executed 86 transactions this year — is a distraction for investors, according Jefferies Financial Group Inc. analyst Jerry O’Hara.

"Harris selling has been an overhang on the stock and continues to be an overhang," he said. "If he did it in a block transaction, it would just be done instead of this slow bleed."

Apollo shares rose $1.06 (1.7%) on Wednesday, closing at $62.61. It has gained 34% this year, but that trails Blackstone Inc.’s 77% climb and the BI Global Private Equity Managers Competitive Peers Index, which is up 51%.

Harris’ spokesman said that the sales represent a de minimis portion of Apollo stock’s daily trading volume and that most of the sales are done through a pre-arranged trading plan. He originally filed the plan last year to sell five million shares but has since increased that level.

Apollo is poised to merge with its permanent-capital vehicle, Athene Holding Ltd., early next year, a change that will make share sales by the firm’s co-founders more tax-efficient. Harris’ departure is scheduled to coincide with the acquisition of the annuity provider.

Almost all of Harris’ 38.6 million Apollo shares are in Apollo operating group units — partnership units that have to be converted to common stock before being sold.

This process results in a taxable gain, which is levied partly as capital gains and partly as ordinary income.

Once the merger is complete, Apollo will be reorganized into a C-corporation with a single class of common stock. Harris’ units will be swapped for cash and Class A shares. Gains from the sale of these shares would be taxed at the capital gains rate.

The federal capital gains rate is 23.8%, including the 3.8% surtax on net investment income. The top federal ordinary income marginal tax rate is 37%, meaning that, all else being equal, Harris would be better off selling once the merger is completed.

Harris, though, has already started laying the groundwork to raise his own fund. He met with recruiting firms to help him start building a team and plans to invest in middle-market private equity deals, Bloomberg reported in July.

He already has significant outside business interests. His family office manages his $7.4 billion personal fortune, including as the primary owner of the NHL New Jersey Devils and as part of the group that owns the English Premier League soccer team Crystal Palace..

Black has a net worth of $11.6 billion, according to the Bloomberg Billionaires Index, with about half of that in Apollo shares. He’s never sold a share in the company.