Wednesday, October 29, 2008

Selling At The Peak: Blackstone's Schwarzman

In yesterday's post, I related some of the conversation I had recently with an acquaintance who works as a manager at one of the three rating agencies.

As he and I parted company, we were talking about the excessively short-term nature of investment bank compensation. On that theme, I mentioned Blackstone's IPO of last year.

Now, to be completely candid, I couldn't recall exactly when Steve Schwarzman took his private equity firm semi-public. I knew that I wrote a series of posts about the momentous event. But I couldn't accurately place in which month the firm sold its IPO in 2007.

This being the case, I was merely conjecturing when I told my colleague that I'd bet, if you looked, that Blackstone's IPO was at or near the top of the S&P500 Index.
Call me cynical. Or sceptical, which I think is more appropriate. Sometimes, they are the same. Like in this instance.
I know this sounds contrived, but it's really true. I was conjecturing without having checked either a chart of the last few years of the S&P or the actual date of Blackstone's IPO.
With respect to Blackstone's IPO, I found this post from a date just prior to the event, in June of 2007. The accompanying chart confirms this with a beginning date of BX's price chart in July of last year.

Besides fixing the date of the IPO, my post noted some of the strategies Schwarzman and his colleagues employed to quell any effective questions from financial analysts regarding the valuation of the firm's assets as it sold part of itself to the public.
Here's the five year price chart for the S&P500 Index. The recent peak for the price series is clearly in mid-2007. There were two similar 'tops,' one in June, and the other just after September.
The next chart, a two-year view of the S&P500 Index price series, more clearly identifies the peaks as July and October.
So, amazingly, I was correct in my cynical view that the best of the private equity shops either called, or defined the market top with its IPO.

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