Does the Blackstone Group care about its shareholders?

The Blackstone Group L.P. (Public, NYSE:BX) was hyped so much in the IPO that everyone thought they had to sell their house to get in on it last year. The idea of owning a private equity firm was shoved down our throats by everybody.  On opening day Blackstone Group's market value reached about $40 billion, the stock started the morning at $31 and closed at $35.06. It was the biggest U.S. IPO for a private-equity firm and the biggest overall U.S. IPO in five years. Today shares of BX are in the $16 range, recovering from a low of $13.82 on Monday.  Still think you need to own a piece of them?

Co-Founder of Blackstone Group, Stephen Schwarzman took home $4.78 billion in compensation for 2007.  Nice payday when you consider the market cap of The Blackstone Group L.P. is only $4.06 billion.  Schwarzman has done nothing for shareholders but take the money and run, faster than Forrest Gump being chased by a pack of wolves. 

Just check out the loss since the IPO:

Shares of BX now sit under $16, super. In what world do we live in that the top dogs, just like all the subprime mortgage lenders deserve such massive payouts?  Once you become a company that is publicly traded, you take on a new breed of madness known as the 'shareholder', and shareholders have these things called, 'expectations' (Schwarzman you may want to start taking notes).  Its the reason why guys like you and me invest and take a risk on a company, hoping you can come along for the ride and make a few bucks so that you can get to retirement faster.  Then you got guys like Stephen Schwarzman who are in it for the money, along with his friends Angelo Mozilo (Countrywide CEO) and Stan O'Neal (Ex-CEO of Merrill Lynch) who make investing a circus ride gone bad. 

Who in their right mind would buy shares of BX now that we know how much Schwarzman took home and I haven't even got to how bad the company is doing?

May the Schwartz Be With You, Stephen.

On Monday (3/10) Blackstone Group reported a Q4 loss of $170 million, keep in mind they had a profit of $1.2 billion in the previous year.  Lost your appetite for Private Equity investing yet?  Hold on, it gets better. In a Freudian slip during a conference call, Schwarzman said Blackstone went "panic" last year, when he had intended to say "public." Here's more of the detail thanks to Forbes.com:

The fourth-quarter deficit was attributed to challenging business conditions, a write-down of the firm's investment in Financial Guaranty Insurance and increased expenses. FGIC's loss in value reduced Blackstone's 2007 revenue by $122.2 million.The investment firm said revenues slid to $345 million from $1.28 billion a year earlier.

Blackstone's third-quarter performance was equally disappointing and the company's leadership showed prescience in its dire predictions about the credit crisis. (See "Blackstone's Black Hole") In January, Blackstone backed out of a $7.8 billion deal with Alliance Data Systems citing conditions imposed by the U.S. Treasury. (See "Alliance Stonewalled By Blackstone") A takeover of PHH, a leading mortgage lender, also fell through in January with the lender saying Blackstone couldn't come up with enough cash. (See "PHH Calls It Quits") Earlier in the same month it bought GSO Capital Partners, a New York-based asset manager that invests in various types of debt. (See "Blackstone Buys Deal Financier")

So was there any good news? 

The company reported $102.4 billion in assets under management which is a 47% increase from the $69.5 billion it had a year ago. It also announced a quarterly dividend of 30 cents per share and "reaffirms priority" for paying dividends of $1.20 per year through 2009. Analysts polled by Thomson Financial, had expected Blackstone to produce a profit of 19 cents per share for the quarter.  Wow, what a report.

So what to conclude fellow Masters?  Avoid Blackstone and if you see Schwarzman on the street, ask him to show you his Schwartz.  It may be gold plated by now. 

With Wall Street on edge these days, why would you take a risk on a stock that has demonstrated behavior that is clearly not in the best interest for shareholders?

You don't, these guys will go private by 2009, the end. There might be a bounce in shares if they keep falling, maybe go to $11 a share but if you are in it for the long hall, you better guard your Schwartz from Schwarzman.

Disclaimer: No way in Hell does the Author own any positions in BX.