Brookfield CEO Says Company Undervalued Up To 40% By Public Market

Brookfield Asset Management's top executive is frustrated with the public market's assessment of his company.

BAM CEO Bruce Flatt believes the private equity investment giant should be valued at around $57 per share, rather than the $42.50 per share valuation it sported when trading opened on Monday, he said in a statement surrounding BAM's Q4 earnings report last week. Flatt attributed the discount of nearly 40% to investor sentiment influenced by news and world events outside of the company itself.

“Price is a function of supply and demand at any point in time, which is often influenced by the news of the day, short-term results, and the investor view of macro events that often have nothing to do with the company,” Flatt said in his statement. “This has always been true, and is even more so today with the emergence of [exchange-traded funds], indexing, social media, the 24-hour news cycle and all the information bombarding investors.”

That perceived disconnect between a company's true worth and stock market price is also driving BAM's attempts to take its biggest real estate-focused subsidiary, Brookfield Property Partners, private by paying a proposed $5.9B for the 35% of the REIT it doesn't own already. Brookfield Property Partners' board is reportedly still considering the offer, which was made public in early January, Crain's New York Business reports.

Brookfield Property lost $2B in 2020, mostly due to the steep decline in the value of retail properties, and BAM leadership believes that private ownership would allow the company to make bolder decisions regarding selling or redeveloping flagging assets. If its takeover is successful, BAM will attempt to radically reduce Brookfield Property's portfolio, Flatt said in his statement.

Part of Flatt's faith in BAM's value could stem from his optimism that the office market will recover from pandemic conditions much quicker than consensus predictions believe. Meanwhile, major office occupiers continue to delay bringing their workers back, in some cases indefinitely, The Wall Street Journal reports.

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