Blackstone Group’s shares haven’t looked so hot since the firm went public in June 2007. No secret there. That’s due to a lot of things, including the fact that investors aren’t really sure what to make of the public private equity giant.
Steve and Tony have lodged a handful of “the market doesn’t understand us” comments, mostly in reference to leverage or mega-buyouts, but to their credit, they haven’t been crying us a river like some whiney CEOs I know. And why should they, when they’ve got analysts to do their dirty work?
Today Howard Chen of Credit Suisse took up the BX torch, penning a report titled “Ten Common Misconceptions about Blackstone.” The report is accompanied by an “Outperform” rating.
So what are the markets just not “getting” about Blackstone?
Here are few highlights from Chen’s In Defense of Blackstone 101note:
The firm won’t be able to raise new funds.
FALSE! The firm has raised all kinds of money since the credit crisis started! Look at BCP VI, the fund that’s less than halfway to its (lowered) target after what, just two years in the market?
The firm only does private equity.
FALSE! Blackstone does all kinds of real estate, hedge fund, and placement agent crap. Remember that whole meme about Blackstone turning into Goldman Sachs and Goldman Sachs turning into Blackstone? They didn’t get that rap for nothing (luckily they avoided the whole vampire squid rap). But we knew that.
The firm’s writedowns impact its fee stream.
FALSE! Buyout firms get fees based on committed capital, not value. (Note: For the first four or five years. Technically, once the investment period ends, most firms actually do calculate their fees based on write-ups and write-downs.)
Blackstone’s bad bets will hurt its balance sheet.
Again, FALSE! Blackstone has two masters, its LPs (they’re the ones that get screwed by bad bets) and its shareholders. The firm will probably tell each group that its primary fiduciary duty is to that group, but technically its primary duty is still to the LPs of its funds.
And on and so on. As The Fresh Prince once said, shareholders just don’t understand.