One on One with David Menlow, President of IPOfinancial.com
Friday, June 22, 2007
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SUSIE GHARIB: This was the frenetic scene at Blackstone's trading post at the big board this morning. Demand for the stock was huge with the initial offering believed to have been about seven times oversubscribed. Blackstone shares headed higher right from the opening bell and by the end of trading, 113 million shares had changed hands. They closed at $35.06, up $4.06 or 13 percent from the $31 offering price. Joining us now to talk more about Blackstone, David Menlow, president of IPOfinancial.com. Hi, David.
DAVID MENLOW, PRESIDENT, IPOFINANCIAL.COM: Hi Susie, great to be here.
GHARIB: A 13 percent increase on day one, so how do you rate the Blackstone IPO performance?
MENLOW: I'm absolutely pleasantly surprised with what happened today. There was so much talk about how many times over subscribed the deal was and it just seemed as though this was going to be a run-away situation, similar to Fortress Investment Group and it wasn't. This was a very controlled environment on a very large deal, very prominent and even though the market was down, strong today. This stock acted wonderfully.
GHARIB: There are probably a lot of our viewers who are thinking about show I buy Blackstone Group stock? What would you say? What are the risks and rewards of owning this stock at this point?
MENLOW: I'm going to start with the risks first, because I think this is important for everybody to understand. If you're going to first make an investment in Blackstone, this is a company where the traditional metrics of how you gauge whether or not you want to be in this company has to be cast aside. This is a private company that just turned public, but they've done so in a way where they're still going to trade like a private company. So you're not going to have any shareholder rights, per se. If you have any kind of a vote, I guess is the best way to say it, you'll have your vote registered, but this is still about what Steve Schwartzman wants to do. The advantages to this is Steve Schwartzman has created an absolutely wonderful cash cow. He has honed this down to a science. He has fabulous results and being in this field means you're just actually riding on the coattails and that could be very lucrative over the next few years.
GHARIB: And Washington has noted about Schwartzman's performance and they're talking about taxing Blackstone at a higher rate. Legislation is in the talking stage. If something like that were to happen, how should investors factor that in whether they should buy the stock or not?
MENLOW: Well, I think Susie, the critical component here is if it does come in, they're going to take the tax rate possibly from 15 percent to as high as 35. That is a big hit. However, with the prominence, with the name, with the institution that Blackstone is, they're managing $88 billion in assets now, as time goes on and if this bill does hit, they're going to be managing more assets, so they're going to be generating more fees, maybe not as efficiently as they did at 15 percent, but people are still going to do very well.
GHARIB: A lot of people are comparing the Blackstone IPO to Google in terms of the sizzle appeal. Do you think that Blackstone can deliver on returns the way Google has?
MENLOW: I don't think that this is a metric that you can actually make a comparison, Susie, only because there is a quantifiable quarter over quarter result gain that you can work with on Google, across all of their financial numbers. Blackstone is going to be about silence and surprise. Two extremes, you're never going to know what is happening from one quarter to the next because they're working on a lot of big deals.
GHARIB: Another private equity firm, Kolberg, Kravits, Roberts reportedly is thinking of having an IPO. What's your view on that? Is that going to be as good as Blackstone?
MENLOW: I don't know that it's going to be as good as Blackstone because now what happens with the next few private equity deals that come out, this is going to have to be a deal that has a distinction with a difference. So how is it different from Blackstone and from there people are going to see well, they don't like the product mix and what their revenue exposures are, so they'll weigh that as to whether or not it's a better deal or be the same.
GHARIB: We're going to have to leave it there. David, thank you so much, have a good weekend.
MENLOW: Thank you, Susie. You, too.
GHARIB: My guest tonight, David Menlow, president of ipofinancial.com.
