[Powerbook]

I've pre-ordered 500 shares with a max of €29. Probably doing another 500, depending on the first prices.
What about you?

Regards,
Powerbook

[turtle777]

Heck no. Due to the tax issue, the stock is not worth more than $ 20-23. But the market doesn't care because of the hype. Basically, everyone is paying too much.

-t

[Powerbook]

Originally Posted by turtle777 

Heck no. Due to the tax issue, the stock is not worth more than $ 20-23. But the market doesn't care because of the hype. Basically, everyone is paying too much.

-t

What tax issue exactly? The German venture tax from 2009?

PB.

[turtle777]

Originally Posted by Powerbook 

What tax issue exactly? The German venture tax from 2009?

PB.

Originally Posted by Wall Street Journal

Accounting for Fees May Add Up
To Slash Blackstone's Valuation
June 19, 2007

Blackstone has had a bad week. But the private-equity group, led by Stephen Schwarzman, is still shooting for a $30 billion valuation in its initial public offering. It may be worth only about two-thirds that -- and not just because the U.S. Congress is considering legislation that would push up its taxes.

To see why, look at Blackstone's earnings. The firm reported pro forma economic net income after taxes of $1.2 billion last year. This is the amount of profit Blackstone would have made last year if it had been a public company rather than a private partnership. A $30 billion valuation is 25 times that figure -- which would be reasonable for such a rapidly growing company. The snag is that the profit figure comes with two caveats -- both connected with the performance fees that it charges investors for the funds it manages.

First, Blackstone is taking an unsustainably low compensation charge in its pro forma accounts. The firm says that, in future, 40% of the performance fees will go to employees. But the 2006 accounts allocate only 18% to them. In the short term, Blackstone can get away with such a low percentage because senior employees will have shares in the company which they will lose if they leave. But as those shares vest, Blackstone will have to increase its compensation to hang onto its employees. That's why it expects the percentage to rise over time.

Second, Blackstone's pro forma accounts are struck after a tax rate of just 17%. That's because, under current law, its performance fees aren't taxed at all at the company level. However, this situation looks unsustainable. U.S. Sens. Max Baucus and Chuck Grassley last week introduced a bill that would force Blackstone and other private-equity groups that go public to pay a higher tax rate. If the bill becomes law, Blackstone's tax rate would rise to about 40% -- once local as well as federal taxes are taken into account.

Taking these two factors together, one can reconstruct an estimate of Blackstone's sustainable earnings for last year. The net effect would have been to lop $500 million off Blackstone's pro forma earnings -- cutting them to $715 million.

The question, then, becomes what multiple to put these earnings on. Blackstone is growing extremely rapidly. Funds under management, which were $51 billion at the end of 2005, had grown to $69 billion at the end of last year. This means that Blackstone's earnings will power ahead in 2007.

Such breakneck growth clearly deserves a high multiple. On the other hand, it is also arguably a symptom of the global leveraged-buyout bubble. If the performance of private equity stalls because too much money has been chasing too few opportunities, or if the liquidity that has been fueling the deal making dries, up, Blackstone's growth could slow rapidly.

In the circumstances, a multiple of 25 times last year's reconstructed sustainable earnings seems about right. That would give the firm a base value of $17.9 billion.

To this, one should make a further adjustment to take account of the fact that low compensation and low tax do have some value even though they probably won't last. One way is to note they were together worth $500 million last year and multiply by five (the number of years over which changes to both tax and compensation are likely to be phased in). The resulting $2.5 billion can then be added to the base number to give a total value of $20.4 billion -- or some $21 a share.

This is, of course, a lot less than the $30 a share Blackstone is aiming for. If investors wish to buy in at that price, they should either believe that the buyout boom has many years left to run or that Blackstone can continue to outpace the taxman -- or both.

-t

[Powerbook]

Ah, yes I've read that. Well let's see what happens... got my 500 at about 26 Euros. Don't know yet how long to hold them though...

PB.

[Mrjinglesusa]

Originally Posted by Powerbook 

Ah, yes I've read that. Well let's see what happens... got my 500 at about 26 Euros. Don't know yet how long to hold them though...

PB.

If you read that, why would you still buy 500 shares at the initial offer price, which appears to be grossly over valued?

[turtle777]

Originally Posted by Mrjinglesusa 

If you read that, why would you still buy 500 shares at the initial offer price, which appears to be grossly over valued?

Well, seems like he is not interested in long-term investing but rather, playing the IPO game.
Others go to Vegas and play Back Jack...
To each his own.

-t

[Powerbook]

Originally Posted by Mrjinglesusa 

If you read that, why would you still buy 500 shares at the initial offer price, which appears to be grossly over valued?

I don't see them as "grossly overvalued". Time will tell what happens with/after the tax laws. Stock weather is generally friendly and KKR is already standing next in line...

PB.

[Powerbook]

Whoah. Stock doing a dive of EIGHT percent... Is that the negative backslash of a presumably 6-8 x oversubscribed stock???

PB.

[turtle777]

Yeah, no shock. They all wanna chash in and going to gain almost nothing. Waste of time.

-t

[Powerbook]

That outlines two possibilities for that stock:
- cut and run
- keep it rather mid- to longterm

Hmmm......

I want to invest into Chinese markets after their current dive. Any opinion here?

PB.

[pooka]

I have a pretty solid performance record. Most female analysts have a "strong screw" rating on me at the moment.

[turtle777]

BX @ 30.53 right now.

It's gonna go down in the 20s.

-t