Blackstone Group Going Public?

Rumor has it that Blackstone Group plans to go public, selling a 10% stake of its management company in an IPO later this year. This would be a huge initial public offering and the founders, Stephen Schwarzman and Peter Peterson, could split upwards of $4 billion dollars. Not a bad payday for two guys who started the firm with $400K in 1985.

But why on earth would a private equity firm go public? Don't these guys thrive on taking public companies private? Don't they regularly lament the street's focus on quarterly earnings targets? Just this year Schwarzman, who may control upwards of 40% of Blackstone, had this to say about going public:

"I think the public markets are overrated," he told a panel at the annual Super Return private equity conference last month. When referring to the efforts of a rival that pursued an offering a year earlier, he added: "To divert yourself like that and then take on that cost is really not worth it."

So why do it, and why now? Well to start out, Blackstone isn't just a private equity firm. Of their $64bb under management, only $28bb is in private equity. The rest is hedge funds, debt funds, restructuring funds, real estate funds etc. They are by all means a diversified asset management company. And though this isn't a pure liquidity play you can imagine that Schwarzman, who is the 73rd richest American according to Forbes, is salivating over having a couple extra billion to invest.

This would also be the second large private asset management firm to go public this year following Fortress Investment Group, and it could be the beginning of a trend in the space. Keep in mind they are only selling 10% of the firm, they will still retain much of the control. The real danger is that though they are only giving up 10% of the equity they will be giving up 100% of their secrecy in the process. Stay tuned for more information on how the deal will be structured. It certainly will be interesting to get a peak inside a company known for its secrecy.