Essay about Stock Market and Firm

1920 Words Oct 3rd, 2013 8 Pages
Background
The Blackstone Group (Blackstone) is a private equity firm founded in 1985 by two former employees of Lehman Brothers. In May 2007 the firm had $88.4 billion under management and had grown 41% annually since 2001.

The firm operated in several business groups but distinguished itself from other firms by extensive collaboration across divisions. It was divided into Corporate Private Equity, Real Estate Funds, Marketable Alternative Asset Management, Corporate Debt Funds, and Advisory Services.

In 2007 Blackstone started to evaluate the option of taking the firm public. Reasons why the firm should do an IPO, outlined by the firm’s internal project group, included:
• Permanent pool of inexpensive capital and a wider group
…show more content…
Second, according to the firm, the suggested compensation package should align the interest of the managers in the firm with the limited partners, or at least maintain it similar to before. However, I am slightly sceptical to this since the only thing that seems to change for them is that a part of their compensation comes in shares. Depending on how the stock market will turn out to react to news from the firm it might be so that the managers realize that they can earn more money by being short-term focused and that would not be aligned with my interests.

In addition, there are a few things that I am worried about as a limited partner despite the measures the firm has taken. The fact that the firm is a public firm is probably more prestigious for the managers than being private. Therefore I am afraid that the focus will gradually turn towards the interest of the shareholders. The firm does not want to have an underperforming or fluctuating stock in the long run and, if this seems to be the case, I am afraid that the limited partners long-term interest may be down prioritized. Another thing that is also worrying is the risk of losing competent people due to the changed compensation package.

3. Would you rather be a unit-holder in Blackstone or a limited partner?

Everything taken into account I would rather be a limited partner in Blackstone. If the structure turns out to work the way that Blackstone

Related Documents