Blackstone CEO Hit Hard As Easy Leverage Ends
Don’t wait for that RSVP to Blackstone Group CEO Steve Schwarzman’s legendary birthday bash.
Schwarzman, the high-flying head of the private-equity giant, won’t be repeating the $3 million fete in his own honor. He’s got bigger problems: a tanking stock, a hit to his own piggy bank, and deals falling apart.
Blackstone is down 58 percent from its IPO in June and off 32 percent just since Jan. 1.
Now analysts are forecasting that the $100 billion investment fund is likely to earn less than half what Blackstone expected in fourth quarter.
Bank of America’s Michael Hecht now says Blackstone will earn $0.11 per share, down from $0.25. Schwarzman himself has lost more than half of his personal fortune, reports the New York Post, down to $3.5 billion.
[Editor’s Note: Special: Why the Real Inflation Rate is Closer to 10%]
Blame the credit crunch. Seems no one on Wall Street much wants to lend more money to highly leveraged deals. Such buyouts plunged by two-thirds in the second of 2007, the Post reports.
Schwarzman is not alone in his pain, if a man who is still really a billionaire can feel that much pain.
Another private equity biggie, Fortress Investments, has slid 63 percent since its February 2007 stock offering, and Kohlberg Kravis Roberts is down 41 percent.
Cerberus, the private fund that bought much of Chrysler only to watch the company implode immediately after, seems now to have wisely avoided the rush to go public that its peers in private equity found irresistible at the top of the bull market.
Yet these guys aren’t dumb. Schwarzman and his equals at the other private funds that offered stock personally made billions.
What remains to be seen, of course, is if their shareholders are in for a turnaround — or will be left holding the bag in a Wall Street version of three-card Monte.
Editor's Notes:
- Special Opportunity: Get $3,000 Options Trading Service for just $99.