Apollo Global Management announced that billionaire Leon Black will step down from his position as CEO by July 31 this year and will be succeeded by co-founder Marc Rowan.
Black will continue as Apollo’s (APO) chairman. The announcement coincides with the release of an independent review related to Black’s previous professional relationship with late financier Jeffrey Epstein. In the review, it was concluded that there was “no evidence that Black was involved in any way with Epstein’s criminal activities at any time.” In 2019, Epstein had been charged with sex-trafficking involving minor girls.
According to the findings of the review, Black paid Epstein for regular financial advice on trust and estate planning, tax issues, philanthropic endeavors, and the operation of his family office. The fees paid to Epstein by Black or his family office were for bona fide tax, estate planning and other related services.
“Apollo never retained Epstein for any services and Epstein never invested in any Apollo-managed funds,” according to the findings of the review.
Furthermore, Apollo announced that its board will include four new independent directors, effective March 1, 2021. In addition, the investment manager’s co-presidents, Scott Kleinman and James Zelter, will join the board and will take on increased responsibility for the day-to-day operations of the company.
“The need for return, both in terms of yield from our credit businesses and more opportunistic return from our private equity and related businesses, is accelerating due to both changing demographics and the financial environment,” Rowan commented. “Last quarter alone our AUM [assets under management] grew by $22 billion to a total of $455 billion.”
Shares of Apollo advanced 3.9% in Monday’s after-hours trading. The stock dropped 10% over the past year. Looking ahead, the average analyst price target stands at $50.88, implying 11% upside potential over the coming year.
Oppenheimer analyst Chris Kotowski, who has a Hold rating on the stock, argued previously that he doubts that Apollo would be permanently damaged by the Black-Epstein ties.
“Epstein obviously had relationships with a lot of prominent people, including other CEOs, and we doubt that all the associated entities will be blacklisted in some way, and we doubt that Apollo will, either,” Kotowski wrote in a note to investors. “That said, it will clearly be a distraction to Black and others in the firm and may well be an overhang on fundraising near-term.”
The rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is backed by 5 Buy ratings versus 4 Hold ratings. (See APO stock analysis on TipRanks)
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