Friday, June 22, 2007

All Eyes on BX

After the successful launch of their IPO yesterday, Blackstone Group(BX) begins trading in a few minutes. Priced at $31, the top of the expected range, it's likely that the new stock will trade in the 40's today, maybe higher.

The IPO reportedly had heavy demand from foreign buyers, and in the aggregate demand was as much as 10X supply. Foreign buyers see a leader in a global business that is priced in cheap dollars. Investors in general are buying an investment style that can conceivably be a long term paradigm for profitability. Twenty years ago Berkshire Hathaway(Warren Buffett's investment firm) was trading at $3000 a share. Today's quote is $108,000 a share. A sustainable investment style in a multi-faceted investment entity, if that's what BX possibly is, can be like buying an index on a financial methodology. Whether tax regulation, leadership continuity, and credit availability are such that BX has legs is guesswork at this point, but getting in on the ground floor of a possible long term mega-opportunity is tempting to global investors. Additionally if the opportunity plays out, to have missed it would look foolish in hindsight. So the demand for positions, even small positions that just get investors on the map, is likely to be huge.

It will be interesting to watch, which is the best action that most of us can take on such an opening day.

2 Comments:

Anonymous Lazarus said...

JOHN,

The market seems to be acting more rationally than expected with BX in the mid-30's. Of course it's a lousy lousy day for a financial stock to trade so your 40's may come around next week if this market calms down. Don't know about that.

3:18 PM  
Anonymous Anonymous said...

BX now looks like a liquidity event for Steve Schwarzman and not much else. Wall St. bent over and took it in order to get Blackstone's repeat deal business. Their investor clients may end up being pissed.

6:03 PM  

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