Listed PE stocks continue to dive(3)

Recently-listed private equity stocks are under-performing on both sides of the Atlantic, casting doubt on the future ability of buyout firms to tap the public markets for additional capital.

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]