Business Insight Zone

Well, who cares what I think? More to the point, Blackstone told you so. Back in June, when the private equity titan made its IPO, I said on CNBC that the stock was way too expensive because it had three premiums built into it:

1. The premium that comes with any non-horrible stock in a sky-high market. This I can live with.
2. The premium that comes with any ultrasexy IPO. This I wouldn’t want to pay.*
3. The Steve Schwarzman Premium. Schwarzman is one of the world’s very, very best appraisers of the market value of assets. He’s crazy-good at this, and he has tons of experience at it. He does not sell any asset he holds at less than the best premium he thinks he can get. In June I made the very simple assumption that he thought it was the best possible time to sell 10% of Blackstone. Guessing that he was more likely right than wrong, I figured that would imply that Blackstone shares — ahem, “common units” — were expensive relative to their long-term market value. We’re not into the long term yet, but so far my guess has been correct.

Mind you, I didn’t foresee how the big drop-off in real estate would impact Blackstone. But I did note their own pre-IPO SEC filings, which warned that it could be years before they turned a profit for the holders of their shares. (Common units, schmommon units — I’m going to call them shares from here on.) They’re doing what they said they would do, in other words, except that the given set of reasons is slightly different.

The result of all this: a looowwww share price relative to the price at IPO. David Gaffen of the Wall Street Journal has perceptive things to say about this here. You can witness the share-price decline from above $35 to below $23 in all its splendor here.

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* If it need be said, I’m not a qualified financial advisor and I never give financial advice on this blog. I’m just sharing an opinion formed from some years of watching the markets.

Category: Finance & Real Estate, IPOs