One has to wonder at the motives for Kohlberg Kravis Roberts (KKR) and Och-Ziff, a hedge fund, to go public after a mediocre IPO earlier this year by hedge fund Fortress Investment Group (FIG) and a disappointing one by private equity firm Blackstone Group a couple weeks ago.
Fortress became the first major hedge fund to go public on Friday February 9 at $18.50 a share. The shares opened at $35, closed at $31, and for the most part haven’t seen those levels since. They closed today at $24.09. Nobody except for people who got a piece of the IPO have made any money in Fortress,
Same for Blackstone: the shares went public a couple Fridays ago at $31. They opened at $36.60, closed at $35.06 – and haven’t been near those levels since. They closed today at $30.63. Again: nobody has made money on Blackstone shares except for people who got some in the IPO and sold on the first day.
So if you’re another big private equity player, like KKR, or a large hedge fund, like Och-Ziff, why go public now?
There doesn’t seem to be much of an appetite for your shares.
There are all kinds of rationalizations. They want to have publicly traded stock to use as currency for acquisitions. Being a public company will allow them attract and retain first rate talent.
But those are just rationalizations: plausible and morally acceptable reasons that cover over the true motive.
I don’t see how it could be any more obvious: they’re selling at or near what they see as a top for their business.
In our financialized economy, it’s essential to think about what that means for the stock market as a whole.
UPDATE (Thu 7/12, 9:15am PST): Bloomberg columnist David Pauly makes many of the same points and shares my view that this marks a top in private equity and hedge funds in a column from Tuesday.