Blackstone Group has moved up its huge and highly anticipated initial public stock offering to this week, suggesting strong investor demand for the stock despite newly proposed legislation that would significantly increase taxes on the private equity goliath.
The IPO shares are now expected to be priced Thursday and to begin public trading Friday. The offering previously was scheduled for next week.
After two U.S. senators last week proposed a bill that would eliminate a huge tax break for publicly held private equity firms, there was speculation that Blackstone would be forced to postpone or cancel the stock offering.
But moving up the IPO date from next week to this week shows that both Blackstone and its potential investors are committed to it, experts said.
“They wouldn’t move the deal ahead if they didn’t have enough orders to get it done,” said Phil Stiller, an analyst at Renaissance Capital in Greenwich, Conn. “I think they’re seeing strong demand.”
The accelerated timetable, however, also indicates that Blackstone or its investment bankers are anxious to get the deal done quickly before market conditions change because of the tax issue or other problems, experts said.
Sal Morreale, an institutional salesman who tracks IPOs at Cantor Fitzgerald, said the deal appeared to be oversubscribed -- when investors seek to buy many more shares than will be available for sale in the offering.
A Blackstone spokesman couldn’t be reached for comment.
Blackstone IPO’s would be the biggest U.S. offering in five years and would mark a watershed moment in the private equity industry. It also would be an unparalleled financial bonanza for Stephen Schwarzman, its chief executive whose stake in the company could top $7.5 billion.
Using money raised from pension funds and other institutional investors, private equity firms buy and restructure companies in hopes of selling them at far higher prices a few years later. The industry has capitalized in recent years on low interest rates to help create a buoyant corporate-merger market and to generate enormous profits, and has become an increasingly potent force on Wall Street and in corporate America.
Private equity funds operated by Blackstone have returned an average of 23% a year since its first fund was launched 20 years ago, according to regulatory filings by the firm. Blackstone’s profit swelled more than 70% last year to $2.3 billion while its revenue more than doubled.
The disclosure of the level of Blackstone’s profitability -- and Schwarzman’s impending payday -- have transformed the firm into a lightning rod for critics in Congress and elsewhere.
From the backlash, a concrete threat to the IPO arose last week when two senators proposed boosting taxes on publicly held private equity firms, potentially eating into Blackstone’s valuation by as much as 20%. Blackstone, however, wouldn’t be subject to the higher levy until 2013 because it filed its IPO plans before the legislation was proposed.
Investors don’t appear to be too worried about the tax issue now, experts said.
“In spite of uncertainties regarding taxation there is still widespread enthusiasm regarding the underlying fundamentals” of the company, said Jay Ritter, an IPO expert at the University of Florida.