Private equity firms are cashing out of their investments. What that means for you

Daniel Gross at Slate has written a good article here:

Are private equity firms looking for a quick exit?

The stock market has rallied impressively since this spring and closed above 10,000 for the first time in about a year. The S&P 500 is up 60 percent since the sages were declaring an Obama bear market in March. (In fact, the bottom came precisely when the Wall Street Journal editorial page published economist Michael Boskin's piece "Obama's Radicalism is Killing the Dow.") Even so, investors should be worrying. The rally has occurred as unemployment has risen and housing has continued to struggle. Plus, it's October, a month in which bad things have frequently happened in the bourses.

Perhaps the most compelling reason of all for investors to fret is that private equity firms are selling shares in companies they control to the public. Blackstone Group CEO Stephen Schwarzman is feeling optimistic and, as Reuters reported earlier this week, the private equity firms he runs plans to take as many as eight companies in its portfolio public. Last week, Blackstone filed a $100 million IPO for Team Health, a hospital-staffing company it controls. As I predicted in back in June, private equity giant KKR is planning an IPO for Dollar General. Sources suggest that HCA, the hospital chain taken private by in November 2006 by KKR, Bain Capital, and Merrill Lynch's private equity arm, could be taken public soon as well. RailAmerica, a railroad operator taken private by Fortress Investment Group in the spring of 2007, had an IPO earlier this week.

Why could a slew of such public offerings be bad news for the stock markets? After all, the billionaires behind these private equity firms are offering individual investors like you and me the opportunity to join them as shareholders of companies that have benefitted from their guidance and counsel.

Finish article at Slate