Shares of The Blackstone Group, L.P. (NYSE: BX) have seen their share of pain since coming public in 2007. The private equity giant will report earnings Monday, and this may further set the tone for at least the public anticipation of private equity firms for the months ahead. Much of that should already be known as the days of the giant club-deals are dead and as many private equity firms have had to focus on smaller deals that are in-line with more historic trends of deals being in the hundreds-of-millions of dollars or in the few-Billion dollar range. Much of the current climate has also revolved around vulture activities and buying assets that are deemed distressed in market pricing that in reality may not be as weak as the prices would indicate. Funds are still being raised.
There are just not many public comparisons to base a history on, so we’d urge traders and investors alike to use any formal estimates as a sort of moving target that might not be as set in stone as most other established companies. First Call had estimates pegged at $0.19 EPS and $434.6 million in revenues on last look. If any guidance is offered, next quarter estimates appear to be $0.26 EPS on $549.8 million in revenues. Once again, use those as a vague moving target as the crowd of analysts making formal numbers is rather small.
Options traders appear to be braced for a move of at least $1.00 in either direction. The chart here has been of little use as the stock’s price has just gone lower and lower. Shares closed down some 3% at $14.58 Friday after putting in a new intraday low of $14.16. Its post-IPO high was $38.00.
Private equity is not dead. But the excesses of 2006 and 2007 are proving to look very similar to the excesses seen in the consumer credit bubble. Blackstone was one of the only private equity firms that made it to a huge public IPO last year, but we have noted how there are in essence many more public private equity firms, hedge funds, and others that act similar to private equity firms. There is even an ETF called the PowerShares Listed Private Equity (AMEX:PSP), and another exchange traded note recently launched.
This may be heresy, but there is at least one thing to consider: if the share prices post the same performance ahead as they have seen since an IPO, it would be very conceivable that Steve Schwarzman and other officers decide its time to go private again.
Jon C. Ogg
March 8, 2008