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A black mark on Blackstone ... and others

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Kai Ryssdal: The buzz on Wall Street — until this week, anyway — has been private equity. And the hottest private-equity group out there has been Blackstone. It was hard to miss all the hype when Blackstone started selling shares a month ago. Mention it to investors today, and you'll get nothing but dirty looks. Blackstone's turned out to be one of the weakest IPOs of the year. Which is forcing other private-equity firms to have second thoughts about going public. Here's Marketplace's Jeff Tyler.

Jeff Tyler: Since its debut on the New York Stock Exchange last June, shares in Blackstone have fallen 21 percent from their initial asking price. Today it had its lowest closing price yet.

Jeff Ptak: So far, it's been a rough ride. Shares advanced modestly, I think you'd say, on the first day of trading. And they've drifted downward pretty steadily since then.

That's Morningstar analyst Jeff Ptak. He says private-equity firms have gotten rich by being opportunistic, and they bring that same approach to the stock market. What does that mean for the individual investor?

Ptak: You're paying a heck of a lot of money for an excellent business, but maybe too much money to recoup the full worth of your investment. So I think the phrase "Buyer beware" is well warranted.

Three private-equity firms have gone public in recent months, and each has performed poorly. For example, Fortress Investment Group shares are down nearly 50 percent.

David Menlow is president of the research firm IPOFinancial.com. He says the track record isn't encouraging for Kohlberg Kravis Roberts, another private-equity firm planning to go public in the next few months. Menlow says the company should hold off.

David Menlow: I would advise them to hit the exit door. Pull the offering. And go back to the drawing board and wait for another leg up in the marketplace.

Some financial commentators have playfully suggested that going public has made Blackstone vulnerable. After all, private-equity firms specialize in recognizing undervalued companies and taking them over.

I'm Jeff Tyler for Marketplace.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.

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