Want to induce a snickering fit among private equity pros? Remind them that China Investment Corp. paid $3 billion for a 9.99% stake in The Blackstone Group, prior to Blackstone’s June 2007 IPO. The investment was worth less than $1 billion as of market close yesterday, and is below $900 million in mid-day trading. Proof, some say, that newbie sovereign wealth funds are dumb money that will soon flee the asset class.
I’ve bought into that argument a bit, but China Investment Corp. isn’t playing along. The state-run organization today amended its agreement with Blackstone, raising its ownership limit to 12.5 percent. No word on if CIC has actually purchased any new shares, but the move certainly indicates its belief that Blackstone shares are being undervalued.
CIC isn’t exactly doubling down, but it is certainly putting its neck out. Remember, CIC’s original investment was strongly criticized by some Chinese journalists, which is about as common as Suzyn Waldman disowning a NY Yankee over steroid use. On the other hand, Blackstone stock can’t really drop too much further… Could it?