It’s no shock that Barron’s decided to make its cover story that of the Stephen Schwarzman picture from the Blackstone Group (BX-NYSE) IPO that closed on Friday.
The article upfront points to not expect a Google (GOOG-NASDAQ) type of return, and noted an opinion that this was the most important IPO since Google. It notes the shares are not likely to quintuple, but do they really think those that made this seven to ten times oversubscribed are thinking they will see a 5-bagger? Investors are buying this for steady returns and to own a piece of the biggest craze since the Internet, but they certainly are not looking for quintuple returns. With a $38 Billion market cap this 5X multiple would imply $190 Billion value down the road, roughly double the size of Goldman Sachs’ (GS-NYSE) current value of $96.7 Billion.
Barron’s says the true winners are Stephen Schwarzman and his partners, and since this is roughly a 10% stake in a Limited partner structure it may be hard to argue this. Of course it also asks if this is the top of the buyout boon we have witnessed from private equity.
Andrew Bary has made many great stories as a writer at Barron’s and it is hard to think that he is merely trying to knock what is present and a trend. We have alluded to the media circus that has been going around pre-IPO about Schwarzman and Blackstone turning into a near tabloid sort of coverage. This feels no different. Of course, we’ll know in a few months or a year out after more hedge funds and private equity firms have come public AND after we know if the buyout craze ended.
We all know many of these companies will have to re-IPO at some point down the road for the recapture of capital to mark gains to these funds. That is the crystal ball issue, and it is always around a WHEN rather than IF. It would just be nice if the media would cover this objectively, rather than like a tabloid or a circus.
What are the odds that Barron’s next weekend grandiose cover story has the picture of a just-released hot phone called the iPhone from Forrest Gump’s friut company named Apple (AAPL-NASDAQ)? Probably pretty high.
Jon C. Ogg
June 23, 2007
Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.
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