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Apollo’s IPO Breaks In First Day: UPDATED

Apollo Global Management launched its long-awaited IPO today and it doesn’t look too good for the newly public private equity firm.

Apollo shares slipped by 80 cents, or 4.21%, to close at $18.20 Wednesday on the NYSE. Volume was 29.67 million shares. Apollo’s stock closed below its $19 IPO price, making it a broken deal.

The IPO’s poor performance surprised some. One PE exec suggested that there was confusion over what Apollo shareholders actually own. This is coupled with the perception that the U.S. government is making private equity a worse business, the exec said, referring to Dodd-Frank Wall Street Reform and Consumer Protection Act. The law, signed into law last summer, requires that PE firms with $150 million or more in capital must register with the SEC no later than July 2011.

The SEC has also proposed, under Dodd-Frank, to be able to cut reduce incentive compensation if they think a PE firm has a structure that encourages too much risk. “What does it do to Apollo shareholders if their incentive on good deals gets whacked?” the exec says.

“Earnings are volatile which the market doesn’t like,” said a second PE exec, “and there are conflicts between what may be in the interest of public shareholders and what may be in the interest of LPs. ”

Apollo raised roughly $565 million Tuesday after boosting the size of its deal and pricing at the top of its range. Apollo sold about 29.8 million Class A shares, up from the expected 26.3 million, at $19 a share. The original price range was $17 to $19. Apollo is selling 21.5 million Class A shares while shareholders are offering about 8.3 million, according to a statement. Underwriters on the deal have the option to buy another 4.5 million shares (this was also sweetened from the 3.9 million originally offered to the banks).

Goldman Sachs, J.P. Morgan, BofA Merrill Lynch, Citi, Credit Suisse, Deutsche Bank Securities and UBS Investment Bank are joint bookrunners on the deal. Barclays Capital, Morgan Stanley and Wells Fargo Securities are also underwriters on the deal.

None of Apollo’s management, employees, affiliates or strategic investors are offering shares in the offering. Apollo intends to use net proceeds it receives for general and corporate purposes and to fund growth initiatives.

With its IPO, Apollo joins the ranks of the Blackstone Group and KKR, which are also publicly trading.