Nagging anxieties are gradually developing into outright nausea. KKR is eyeing an IPO a la Blackstone, says the WSJ - hiring Morgan Stanley and Citigroup to prepare for a listing later this year, adds Dealbook.
The masters of the universe are increasingly looking, and acting, like they are invincible - which is usually when it’s time to start to worry.
Yes, Blackstone’s IPO, the story of which was extensively covered in an FT analysis page on Friday, has sailed through the political storm it’s created - pricing at the top of the range, $31 a share, on strong investor demand.
That comes despite the bill introduced a week ago in Congress that aims to jack up the tax on private equity groups that list as partnerships from 15 per cent to 35 per cent. Cue much talk about how this will reduce Blackstone’s valuation by as much as 20 per cent.
But Blackstone, with its IPO process underway, would have five years to comply with the new law. Others, i.e. KKR, wouldn’t.
And five years is a long time. Just this week, KKR’s Dominic Murphy was in the UK parliament arguing that they are a “patient, involved, long-term investor,” on the basis that they plan to keep Boots for five years. Fortress, which took a 6 per cent hit on news of the bill, has since recovered.
Dan Primack, editor at large over at PE Hub, pointed out to FT Alphaville on Thursday that the law, dubbed the ‘Blackstone bill,’ would only actually affect fewer than a dozen private equity firms that go public - the biggies.
This is not a tax on private equity - in the sense that a re-evaluation of the treatment of carried interest would be. (Although there is talk about that as well.) It’s a tax to cash in on the fad for private equity firms to go public - and should by rights immediately deter the likes of Carlyle and so on from doing just that.
But KKR is still keen, reportedly. Which is worrying in itself.
So what is behind the demand for a piece of Blackstone? Primack argues that buying shares in a Blackstone IPO doesn’t give the individual investor private equity exposure - you get that by being a limited partner in its funds, with the information and upside from each individual uber-success story that that entails. What’s on offer in the two cases is fundamentally different - and, so much for secrecy, it’s all there in the prospectus, he adds.
So what are they buying? They’re buying the first day pop (see Fortress for details - also note the performance since.) They’re buying a brand - and the managers - and the belief that that group of people will carry on doing what they’re doing. They’re buying into the notion, though not arguably the reality, of private equity when it looks just too bubble-icious for words.
Slice of a bubble? Yours for $31.
