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Blackstone As Oedipus at Colonus: Old, Ironic and Looking To Settle Down

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We’re probably unhealthily obsessed with private equity at DealBreaker. And the news that Blackstone might offer itself up to the public capital markets—albeit perhaps a small 10% sliver of itself—has us in an almost poetic mood. To paraphrase Ezra Pound, the thought of what America would be like if equity interests in private equity had a wider circulation haunts our sleep.
We’re not alone in having a strong reaction to Blackstone’s IPO. Here’s quick round-up of the latest:
Bloomberg’s Matthew Lynn wonders if buying what the wise-men of private equity are selling is a good idea. “The managers of those firms are better at calling the top of the market than most of us. The rush of share sales suggests the boom in alternative investments may be ending,” he writes.
This has a certain intuitive appeal but it assumes that the only reason the lords of private equity would sell would be because they see a market top. In the Wall Street JournalHolman Jenkins suggests another reason: these guys aren’t getting any younger. Jenkins notes that the owners of private equity firms might be aiming for that great benefit of being a public company—the right to be an absentee owner. The men who started the fabled PE shops have grown grey in the whiskers and no doubt want to lock in their ownership as they eventually move away from the day to day management.
Think of Oedipus. Not as the truth-at-all-consequences, Hamlet-esque firebrand you know from "Oedipus Rex." But at the end of his life, blind, wounded and wise, and looking to finally end his constant wandering. He has his daughters to think about, and a legacy to pass on.
Okay. We warned you we're in a literary mood today. If that's too much for you--and comparing private equity to Greek tragedy is almost too much for us--think of it this way: Private equity is no spring chicken. Maybe these old cocks finally want to get to the other side of the road.
We also can’t help but remember that the last time we heard warnings about the smart money going public at a top was in connection with the Goldman Sachs IPO. The same arguments applied. Goldman shares were trading around sixty-five dollars then. Now they sit somewhere north of $200.
DealBook points out that Banc of America Securities, Goldman Sachs and Lehman have issued bullish ratings on shares of Fortress (Citi gives Fortress a hold). So we’re not dealing with just the smart guys at Fortress or Blackstone selling to suckers. A lot of the smart folks seem to think there’s room to grow in this area.
We’ll close with one point about the irony of Blackstone’s IPO: it’s over-rated. The threat of regulation on hedge-funds and private equity funds may actually be diminishing the advantage of being privately held. That is, the marginal cost of going public decreases the more likely private equity or hedge fund regulation becomes. Unlike many private corporations, these businesses might not long enjoy the full benefits of being private. And the election of a Democratic majority on Capitol Hill—and likelihood of a Democratic President in 2008—probably make these regulations more likely.
So it is ironic but it’s a different irony than most see. Regulations on public companies may be pushing many to go private, while threatened regulations on private equity and hedge funds may be pushing them public.