All the buyout firms who have listed portions of their management company or permanent capital vehicles with great fanfare in the last 15 months are seeing their offerings trade at a big discount, as public investors continue to shun private equity stocks on both sides of the Atlantic.
Units in The Blackstone Group’s management company hit an all-time low of $25.25 during mid-morning trading on the New York Stock Exchange yesterday, and closed at $25.51 – a drop of nearly 18 percent from its June issue price of $31 per unit. Blackstone’s all-time high of $38 per unit was hit on the stock’s first trading day, 22 June.
Fortress Investment Group, which floated a portion of its management company in February, has also found Wall Street to be a bumpy road. After debuting at nearly double its $18.50 IPO price on its first day of trading, the stock was trading mostly in the $26 to $30 range until June, when Capitol Hill’s scrutiny of alternative assets intensified. Since then the stock price has plummeted, losing more than 4.5 percent yesterday to close at $20.68.
In Europe, Kohlberg Kravis Roberts and Apollo Management’s Euronext vehicles have fared little better. KKR Private Equity Investors, which launched at $24.80 in May last year, hit an all-time low of $21.00 this week. This is despite the firm telling investors earlier this year that it had invested almost all of its original capital – in an attempt to reassure concerns about a possible “cash drag” effect. This figure is also well below net asset value per share, which stood at $25.39 at the end of the first quarter.
Apollo’s AP Alternative Assets has also not enjoyed a warm welcome from Euronext investors. After listing at $19.80, the stock dropped as low as $17.81 in October before climbing back up to $21.65. However, it has since sunk well below issue price – shares were changing hands at about $18.25 yesterday.
“You could be cavalier and say once you raise the money who cares [if the shares are trading low], but that’s not the way managers think about these things,” said Michael Littenberg, a Shulte Roth & Zable partner who specializes in capital markets offerings and permanent capital vehicles.
[Additional reporting by James Taylor]