Shares of publicly listed private equity firm The Blackstone Group hit an all-time low Wednesday amid steep write-downs in the firm’s investments and continued public market turmoil.
Blackstone’s share price dropped to $5.95 at the end of trading Wednesday, marking a significant descent from its initial issue price of $31 per share. The stock slide came amid Blackstone’s disclosure of major write-downs, which in the third quarter led to losses of roughly $509 million.
The firm’s private equity portfolio lost 7.5 percent of its overall value in the third quarter, dropping $68.3 million. That’s compared to profits of $227.3 million in the portfolio in the same period last year.
Jackson Turner, an analyst with Argus Research, said Blackstone's stockholders are pummelling its shares because of the general market environment and not because of any fundamental flaw with the firm.
“Where other large private equity competitors had fairly large problems in their portfolios, we haven't seen that in Blackstone's portfolio,” Turner said, adding he is still rating Blackstone a “buy”.
Blackstone has done several things in the last few months that has positioned the firm to emerge from the market downturn in a stronger position, he said. The firm's acquisition of debt investor GSO Capital in March gives it the ability to take advantage of distressed opportunities. Blackstone acquired GSO for $930 million in March 2008. Turner also said China's decision to invest 25 percent more in Blackstone was a show of confidence that the firm will get back on track.
Blackstone is reportedly in talks with Boston-based asset manager CrossHarbor Capital Partners to launch a fund to invest in distressed banks, according to a report from Reuters. Commenting on the news, Turner said distressed bank investing would be another good move for the firm.
The firm is in the market looking for opportunities, which is a good sign, Turner said. In contrast, some of the firm's competitors, like Fortress Investment Group, are “all hands on deck” to fix problems, he said.
Fortress, which went public in February 2007 at an issue price of $18.50, reached its 52-week low at $2 Wednesday, before recovering to $2.27 at the close of trading. Fortress also reported steep losses in private equity in the third quarter, with earnings from its portfolio dropping 78 percent to $18 million, compared to $82 million in the same period last year.
Fortress’ portfolio companies have $118 million of remaining debt coming due this year, and $3 billion coming to maturity in 2009. Half of next year’s debt is held by a single undisclosed portfolio company.