More and more discussions of IPO’s for hedge funds and private equity firms are more forthcoming today. Blackstone, one of the largest private equity players in the US, may be coming public via an IPO. After some private equity IPO’s in the EU were less than wonderful, the rumors on this have been muted until recently. Also, the stock market drop muted some of the rumors and gossip in the arena recently.
CNBC’s David Faber was reporting more heated discussions on this in a segment around the market open and Faber said that Goldman Sachs is helping to draft the filings. This may be the first televised report but this certainly is not the first time such discussions have come up, and many such discussions were happening in late 2006 when private equity deals were flying left and right. Faber also noted that the market cap of such a deal would be valued at some $20 Billion or more. That figure is actually within the range we have heard, but frankly some of the street gossip may be more ‘guestimates’ than anything. The initial targets for a market cap were originally said to be in the $18 Billion to $25 Billion range. Apollo, KKR, and Carlyle were mentioned by Faber as potentially considering an IPO, but we have heard of many more that are also “considering” this strategy in recent weeks.
A private equity firm coming public poses a bit of a dual-dilemma. Private equity firms are able to do some of the investing that they do BECAUSE they are not public and because they do not often have to answer to thousands of investors and regulators. Many private equity managers also do not want their information and their data to become public information as well. But recent attempts to investigate private equity by various agencies may actually offer a bit of self-regulation before any strange laws or policies are forced upon them by regulators or by Congressional inquiries. So there is a heads and tails to this.
This follows the success of the IPO of Fortress (FIG-NYSE) in the hedge fund world with what is now a $10+ Billion market cap, and there are numerous rumors of others that want to come public as well. To avoid rumor mongering we are avoiding some of the ongoing rumor names out there in hedge fund land. With all of the regulatory changes they are dealing with, their hands are full enough without them having to deal with more rumors. Basically, if a hedge fund is in the top 20 in size there are rumors about them considering an IPO as another potential monetization on top of their fee structures. Also keep in mind that some of the largest hedge funds globally are basically subsidiaries of the large brokerage firms, so some of these will be hard to take public unless they want to venture into the tracking stock game again. Some of the large players in the brokerage firms that operate hedge funds or private equity are Goldman Sachs (GS-NYSE), Lehman (LEH-NYSE), Merrill Lynch (MER-NYSE), J.P.Morgan (JPM-NYSE) and others.
Around the same time that Fortress came public via its IPO, we actually gave a list of other public companies that operate either directly or indirectly in this field. So there are some companies that already public on the fringes of hedge funds and private equity. Some of these are Apollo Investment Corp (AINV-NASDAQ), American Capital Strategies (ACAS-NASDAQ), Allied Capital Corp (ALD-NYSE), and others. Here is the full article with the full list from last month. Regardless of public opinion, this is very likely to occur. There is just too much money at stake and it may be a round of monetization in a group that is always looking for new inventive ways to make money.
Jon C. Ogg
March 16, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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