The Blackstone Group L.P. (BX) offered an initial public offering on June 22nd, and I decided to grab my piece of the pie about a week later when BX announced the Hilton Hotels Takeover. Rather impatiently, I made the mistake of placing a market order for 50 shares of BX in my Roth IRA. It cost me $31.99 per share because my market order was executed at the top of the intraday trading cycle, and now I'm down about $2 so far.
Blackstone commentaries from Wall Street Investors
Because there is very little financial data to analyze, I will instead provide you with some interesting commentaries for thought on the Blackstone IPO.
Jim Cramer from CNBC's Mad Money on Blackstone IPO
Private equity right now is like technology in 2000 as there is no point getting in at the top. Private equity firms have had a great run but when you see the likes of The Blackstone Group L.P. (BX) CEO Stephen Schwarzmann selling a huge block of his own company's stock why would other investors want to get in? Jim thinks if a Democrat wins the White House in 2008 billion dollar companies like BX, Apollo and KKR could see taxes that will go through the roof. The PEs have raised a ton of money and created so much competition to find the next great buyout there will likely be higher interest rates on these transactions. His biggest warning flag is that hot companies usually only get taken public at the end of the cycle. Jim's bottom line was “if you want to invest like a private-equity manager do not buy their stock. Do what they do and sell it.” (Source: Thestreet.com)
Jim Jubak from MSN Money
Because the very smart guys at the Blackstone Group who are doing this deal see the handwriting on the wall. The success of buyout funds like theirs has been built on cheap debt. Cheap debt has made it possible for the Blackstone Group and other private-equity managers to buy…Cheap debt has made it possible for these private-equity funds to pay themselves big dividends on their investments in these companies, before taking them public, by having the newly private company borrow to fund the payout. And cheap debt has made it possible for these investors to leverage a modest equity investment in these deals by borrowing most of the purchase price, so that they can then reap returns of 30%, 50% or even 100% when they sell the acquired company back to the public markets….But this game is coming to an end. (Source: TheStreet.com)
Christopher Orndorff from USAtoday.com
Despite Blackstone's record of generating outsize returns, other potential investors voice similar concerns. “Schwarzman is a smart guy. If he is selling, I don't want to be buying,” says Christopher Orndorff, managing principal at Los Angeles-based money management firm Payden & Rygel. “They are not selling at the bottom or in the middle.” (Source: USAtoday.com)
Why Are These Blackstone Commentaries Pessimistic?
Amidst all the Blackstone IPO hype, a core group of investors warns against buying into the top of the Blackstone cycle. In my case, I purchased shares because I don't mind holding for the long run. However, I also have a 20% trailing stop in place, and will liquidate my BX position if need be.
Blackstone knows how to make money, which is why I bought limited units for my Roth. While I love Blackstone's management, I am beginning to worry why the private equity guys would sell there stakes. Why now? If the bull market continues, then BX has some room to run in the short term. But if Stephen A. Schwarzman times a Dow correction, he and his partners will have cashed out, leaving us unit holders with the empty bag.
Blackstone releases earnings on August 6th (correct me if I'm wrong), so we'll gather more information on Blackstone's forward direction at that later date.
BX: Buy or Sell
It depends on your risk tolerance. While there is plenty of pessimistic commentary on BX, nobody can forsee the future. Blackstone could be a tidal wave or wipe out. I got in the game, but may sell half of my stake in the following days to take a more conservative position.
Is Blackstone Going to $80 or $0?