What a scam that was. A final blast of stink from the masters of stink, the hedgies. Gotta hand it to them , they timed it perfectly. More than I can say for the BXholders.
I keep on hearing all this B.S. about how the FIG and BX IPOs mark the top of the market. I really don't see it that way at all. The primary reason these funds went public was not to take the money off the table for the partners, but instead to be able to provide their managers and employees with equity incentives. In fact, a realtively small amount of money was raised in each IPO compared to the wealth of the top partners at each firm. And at least the FIG IPO only included shares held by top parnters and not anyone below them (not sure about BX but it would be easy enough to read the prospectus and see if it was the same arrangment). Instead, I propose that when you see Stocks-R-Us, LLC and the like go public then you know that it's the top of the market. I would wager that one day (I'm not going to make the call as to when) FIG and BX will be seen as the AMZN and EBAY of the hedge fund world. So, it could be that we're just getting started on an incredible wealth building journey, not ready to fall off the cliff. The financial markets are going through a bit of turmoil right now and that's causing many of us to become emotional about one thing or another. But stepping back and looking at the big picture, I tend to think that it's actually a very positive sign that two of the three top blue chip names (with KKR the third) have decided that their business models are best served by providing their employees with public equity incentives. That's because they think those incentives are going to enable those firms to attract the best investment talent. And clearly the best talent is not going to hitch their future to a dwindling investment. Now I'm not saying that anyone should rush out and buy BX and FIG shares. In fact, I would not go anywhere near them now. Just trying to point out an alternative viewpoint (at least alternative to the talking heads in the financial media who are almost always wrong or wrong in their timing) about something that's been brewing in the back of my head for the last few weeks.
Private companies going public is a way for the shareholders to cash out! Smart money is cashing out...and BX is a prime example of this.
Well cashing out is merely one purpose of going pulic. In FIG's case at least (not sure about BX) that was not the stated reason of the offering in the S-1. In fact, the shares issued only represented 10% of Fortress' total equity. And the proceeds were to be used 1/3 to repay borrowings under a credit facility and 2/3 for general corporate purposes (I got it wrong in my prior post and went back and re-read the prospectus). That hardly sounds like cashing out to me. So it seems like the smart money is not really taking anything off the table. But is instead providing a way to further grow their businesses through equity incentives. In fact, here is the relevant section from the S-1 that describes the reasons FIG went public: Why We Are Going Public In order to maintain and expand our position as a leading global alternative asset manager, we need people, permanence, capital and currency. As a public company, we will be best positioned to meet each of these goals: ⢠People â to increase our ability to provide financial incentives to our existing and future employees through the issuance of publicly-traded equity securities that represent the value and performance of the company as a whole. In a highly competitive market for investment professional talent, publicly-traded equity securities provide us with a valuable additional compensation tool; ⢠Permanence â to solidify our institutional presence as an ââinvestor.ââ Being a public alternative asset manager will benefit us as institutions and individuals increase the portion of the capital they allocate to us; ⢠Capital â to more efficiently access capital that we can use to grow our businesses and create new investment products; and ⢠Currency â to provide us with a publicly-traded equity security that we can use to finance future strategic acquisitions.
A little more info. The BX IPO did involve some cashing out. A total of about $7B was raised, representing 22% of BX. But only about 60% of that (representing about 13% of BX's equity) was used to cash out senior managing directors. Again, 13% hardly seems like cashing out to me.