Blackstone

Blackstone - Blackstone Group(BX Weeks before Blackstone Group one of the most prominent private equity firms went public on June 22nd 2007 CEO

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Blackstone Group (BX) Weeks before Blackstone Group, one of the most prominent private equity firms, went public on June 22 nd , 2007, CEO Steve Schwartzman claimed that public markets were “overrated.” This is an interesting comment to make when one decides to make one’s own company a publicly traded one. There are many possible reasons for Schwartzman’s quick change of heart. For instance, the CEO had billions to gain from the IPO and he could also protect the money he had in the company already. The advantage of making a private equity firm public is the increase in available capital, making it much easier to finance deals for new acquisitions. The paradoxical factor in making a private equity firm public is that the majority of the company’s income is made from doing the exact opposite. Is it possible for Blackstone to buy itself out in five years, turn itself private, and then sell itself to the highest bidder after restructuring? This extreme example makes the idea of going public seem ridiculous for Schwartzman and Co. One theory, which seems to be panning out in our current receding economy, is that Blackstone believes the public markets were going to become worse after June 2007. Going public then would help their senior executives cash in on their past success, again, and help comfort the company in an expected bear market. Investors did not receive these notions as heavily in the first few days following the initial public offering. Blackstone jumped as high as 25%, but then quickly began to trade under its IPO price. Today, Blackstone’s stock is 30% under its IPO. Many reasons factor into Blackstone’s poor performance as a publicly traded company. Blackstone registered a 113 million dollar hit in their 3 rd quarter earnings (1 st public). This was in large part due to the 800
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million dollar IPO fees that Schwartzman and the boys took when they went public in June. Blackstone is still acquiring companies through buyouts, Hilton Hotels as of recent, however the market for cheap underperforming companies is not what it used to be. Many companies are overpriced for their underperforming status. This is leading to less buyouts across the board. It does not help Blackstone’s stock price that private equity companies are
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This note was uploaded on 04/10/2008 for the course ECO 203 taught by Professor Reinauer during the Fall '07 term at Rollins.

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Blackstone - Blackstone Group(BX Weeks before Blackstone Group one of the most prominent private equity firms went public on June 22nd 2007 CEO

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