talking point | the blog at LeeHudsonTeslik.com

What Does the PE Selling Spree Mean?

Posted in Private Equity by teslik on October 12, 2009

Blackstone is diving headlong back into the deal-making churn. The FT reports the private equity behemoth is planning to list up to eight companies it owns for IPOs, and to sell at least five others. The piece says this marks “a reversal of its pessimistic view of the global economy and financial markets.”

I’m not sold on this point. The most convincing support of the FT’s argument that Blackstone is now more economically optimistic is the fact—buried deep in the article—that Blackstone is also buying three companies. But even so, the company is selling far more than it is buying. Why not conclude, instead, that Blackstone is trying to cash in at what it perceives to be the top of the rally?

You could make the same argument, incidentally, about Kohlberg Kravis Roberts’ looming IPO. Doesn’t this echo Pete Peterson and Steve Schwarzman’s (very prescient) move to list Blackstone back in 2007? Peterson and Schwarzman sold their firm at the peak—then the markets crashed. Perhaps KKR is making the same kind of bet (and Blackstone is doing the same by dumping a bunch of companies right now).

If I’m right, this news isn’t nearly as reassuring as the FT makes it out to be.

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