Blackstone Hysteria

Update: Blackstone has priced its IPO at the high end of its proposed range. The firm sold 133.3 million units at $31 per share ($29-$31 range), for an IPO take of $4.13 billion. It is the largest U.S. IPO since CIT Group went public in July 2002, although less than the $5 billion KKR raised for a co-investment fund last year on the Euronext Amsterdam…

The Blackstone IPO is expected to price within hours, as all reports are that it is significantly oversubscribed. The only thing that can stand in its way now would be the SEC, which is being petitioned to do just that by Henry Waxman, chairman of the House Committee on Oversight and Government Reform.

Waxman today sent a letter to SEC chairman Chris Cox, asking that the Blackstone IPO be postponed until “Congress has had a chance to hold hearings.” Specifically, he is concerned that the Blackstone IPO may present “investors and the public with new and undisclosed risks.” Let’s hope Cox turned off his Blackberry, because Waxman is out to lunch on this.

I’m not saying I’d buy Blackstone’s IPO shares – I wouldn’t, although I’d like to be a limited partner in its funds – but I also think the firm has done a commendable job laying out all of the risks in its massive prospectus. If anyone doesn’t read it carefully and still invests, then perhaps they should be called to testify on this nation’s crumbling educational system.

Waxman – and others like him – are operating under the hysterical delusion that private equity is still a secretive industry with old men smoking cigars behind velvet ropes at the 21 Club. And they want to screw you. It just isn’t – and they most of them just don’t. Not only has private equity become more public via sites like this and popular press coverage, but its deals have become more transparent because PE firms are often buying public companies. This means the prices and proposed debt packages are publicly-disclosed. Plus, most fund returns and IRRs are available via state pension systems like CalPERS and the State of Washington.

Now it is certainly true that retail investors will not get much insight into what Blackstone is doing. For example, holders of BX common stock won’t learn details of most deals – but that is stated very clearly in the prospectus. Ditto for not making money on individual Blackstone homeruns. If you want to get paid, sell the stock. Blackstone even did an amended filing to include the possibility that Uncle Sam will up its annual tax bill. It’s all in there. Investors just need to read it.

Waxman should concentrate on things like cost overruns in Iraq (ok, I know he is – but focus Henry, focus).