Blackstone soars 13% in 1st day of trading
Shares of private equity giant Blackstone Group bucked the general market retreat in their debut on the New York Stock Exchange yesterday, surging $4.06, or 13.1 percent, to close at $35.06.
Blackstone's advance came on a day when the increasingly volatile Dow Jones industrial average plummeted 185.58 points, or 1.4 percent, to 13,360.26 amid fresh jitters about rising interest rates, higher crude oil prices, and hedge fund woes tied to subprime mortgages.
"The market's holding it back clearly, but investors want into this," Rob Lutts , president and chief executive of Cabot Money Management in Salem, said of Blackstone. "It's a top operator in a category investors couldn't participate in in the past."
New York-based Blackstone is the largest and one of the first of the so-called buyout firms to go public, raising $4.13 billion Thursday in the sixth-largest initial public offering in US history.
Buyout firms have generated tens of billions of dollars in returns in recent years by raising money from pension funds and other limited partners and using it to purchase companies or controlling interests in them. They then recoup their investments, often at high multiples, by selling the companies or taking them public through stock offerings. A rival buyout behemoth, Kohlberg Kravis Roberts & Co., also of New York, is moving forward with plans for its own IPO.
Blackstone shares priced Thursday at $31, the high end of its target range, and opened trading yesterday at $36.45. They climbed as high as $45 before settling back to $35.06, as more than 113 million share changed hands. The stock moved up in after-hours trading, indicating continued interest from investors.
David Sowerby , portfolio manager for Loomis Sayles & Co. in Boston, said the stock's performance showed the flow of dollars into private equity funds was still strong. "If there was a bigger tailwind in the market, these shares would be doing even better," he said.
Sowerby said public and corporate pension fund managers are clamoring to invest in private equity funds, driving up the value of the buyout companies. "Everyone's in search of excess returns, and they're looking for alternative investments," he said. "That's what's fueling the move in Blackstone shares on a day when the market's down."
As more private equity firms sell their shares to the public, the new issues could help lift US financial markets in the coming year, though other factors ranging from interest rates to corporate profits will also come into play, Sowerby said. Yesterday's sell-off, for instance, was sparked partly by concern over rising interest rates around the world.
Lutts said Blackstone's growth prospects look strong in the aftermath of its IPO. As part of the offering, the firm agreed to sell $3 billion worth of shares to the government of China through its state foreign-exchange investment company. "From Blackstone's perspective, the door is open for all kinds of new business in China," Lutts said. "I would guess they have very big growth plans in Asia going forward."
At the same time, the willingness of Blackstone partners to tap the public markets may signal that the largest gains of the current bull market are past, Lutts suggested. "These guys are no dummies," he said. "They know the time to sell is when everything's looking good.
"Clearly this is not the beginning of the stock market run," Lutts said. "Is it the end? We'll have to wait and see."
Robert Weisman can be reached at weisman@globe.com. 
