The Blackstone Group’s impending IPO is an attempt to tap the public markets without being regulated by the Securities and Exchange Commission, argues a letter sent to the SEC by America’s most powerful trade union federation.
The letter, seen by Financial Times reporters, was sent to the SEC on Tuesday. Blackstone, one of the largest private equity and alternative asset management firms in the world, is preparing to go public on the New York Stock Exchange.
The letter was sent by the AFL-CIO, a trade union federation which represents some 10 million unionised workers and 54 unions. In recent years, organised labour in the US, the UK and Europe has taken an interest in private equity firms as they have grown in influence and acquired more unionised companies. Some union leaders have argued that private equity deals unfairly concentrate wealth creation in the hands of a small number of GPs and at the expense of workers.
The news comes as the US House Financial Services Committee prepares to hold hearings titled “Private Equity’s Effects on Workers and Firms”. A member of the Service Employees International Union will testify before the committee. The SEIU is not a member of the AFL-CIO.
Relations between unions and private equity GPs are not uniformly hostile. Earlier this week, the United Auto Workers union endorsed Cerberus Capital Management’s proposed buyout of Chrysler.
The AFL-CIO letter specifically charges that the Blackstone IPO is an attempt to “evade the coverage” of the Investment Company Act of 1940.
In its prospectus, Blackstone asserts that its public entity will be “a limited partnership and as a result will qualify for and intend to rely on exceptions from certain corporate governance and other requirements under the rules of the New York Stock Exchange.”
The Blackstone IPO “serves no practical purpose aside from creating a mechanism for Blackstone Group to sell its shares to the public without being regulated by the Commission”, according to the letter.
In a March press release, the AFL-CIO said it would ask “regulators to reject demands by ’irresponsible’ elements of the business community to weaken investor protections.”
“’Transparency and accountability are the source of our capital markets’ competitive advantage and are vital to protecting the security of working people’s retirement. We need to extend those principles to the trillions of dollars now in hedge funds and private equity,’” said AFL-CIO Secretary-Treasurer Richard Trumka in the release.
The Blackstone IPO is represented by law firms Simpson Thacher & Bartlett and Skadden, Arps, Slate, Meagher & Flom.