Blackstone's Struggles Continue
Blackstone is trading 20% below its IPO price. Fortress is back near its 52-week low. Yesterday, hedge fund giant Man Group's brokerage arm -- MF Global -- fell dramatically after its IPO after being priced underneath its offering range. In London, Daniel Loeb's Third Point LLC listed a hedge fund that raised $525 million, which was far short of the $690 million it hoped to raise. The market is bearish on anything that smells of private equity or hedge funds right now, either due to systemic risk stemming from the subprime shakeout, worries about a tax hike on carried interest or just concerns that we have reached a peak in the market.
Blackstone was off another 5% today after a miserable month. The company now trades at a PE of 9.67. Just to bring this in to perspective, Blackstone is now trading cheaper than brokerage firms like Bear Stearns and UBS. I think the market may not know how to value a management company like Blackstone. Remember this is a company that has had virtually uninterrupted growth over the last 20 years. They attract some of the top talent on the street. They sold a sizable stake to China which tells me they should have access to the Chinese market that other firms just won't have. Yet, every day the stock goes down.
The questions then become:
- At what price does Blackstone become a buy?
- Will Blackstone's struggles scare off Och-Ziff or KKR?
- Are investors realizing that non-voting shares in master limited partnerships have far more risk that voting shares in public corporations?
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